Improper Payments
Agencies' Efforts to Address Improper Payment and Recovery Auditing Requirements Continue Gao ID: GAO-07-635T March 29, 2007The federal government is accountable for how its agencies and grantees spend hundreds of billions of taxpayer dollars and is responsible for safeguarding those funds against improper payments as well as for recouping those funds when improper payments occur. The Congress enacted the Improper Payments Information Act of 2002 (IPIA) and the Recovery Auditing Act to address these issues. Fiscal year 2006 marked the 3rd year that agencies were required to report improper payment and recovery audit information in their Performance and Accountability Reports. GAO was asked to testify on the progress agencies have made in these areas. Specifically, GAO focused on (1) trends in agencies' reporting under IPIA from fiscal years 2004 through 2006, (2) challenges in reporting improper payment information and improving internal control, and (3) agencies' reporting of recovery auditing efforts. This testimony is based on GAO's previous reports on agencies' efforts to implement IPIA requirements for fiscal years 2005 and 2004 and current review of available fiscal year 2006 improper payment and recovery auditing information. The Office of Management and Budget (OMB) provided technical comments that were incorporated as appropriate.
GAO identified several key trends related to IPIA reporting requirements. (1) Risk assessments: For fiscal years 2004 through 2006, some agencies still had not instituted systematic methods of reviewing all programs and activities or had not identified all programs susceptible to significant improper payments. Further, certain agencies' risk assessments appeared questionable. GAO also noted that OMB's recently revised IPIA implementing guidance, which allows certain agencies to perform risk assessments every 3 years instead of annually, may result in fewer agencies conducting risk assessments in the future. (2) Improper payment estimates: Since fiscal year 2004, agencies have made some progress in reporting improper payment information. The number of programs reporting improper payment estimates for fiscal year 2004 totaled 41, compared to 60 programs for fiscal year 2006. The total improper payments dollar estimate was $45 billion in fiscal year 2004, $38 billion in fiscal year 2005, and about $42 billion in fiscal year 2006. (3) Noncompliance issues: Although not currently required by IPIA to do so, some agency auditors continued to report problems related to agencies' risk assessments, definition of programs for IPIA purposes, sampling methodologies, lack of reporting for all risk-susceptible programs, and supporting documentation. Although showing progress under OMB's continuing leadership, agencies' fiscal year 2006 reporting under IPIA does not yet reflect the full scope of improper payments. Major challenges remain in meeting the goals of the act and ultimately improving the integrity of payments. First, some agencies have not yet reported for all risk-susceptible programs. For example, the fiscal year 2006 total improper payment estimate of about $42 billion did not include any amounts for 13 risk-susceptible programs that had fiscal year 2006 outlays totaling about $329 billion. Second, certain methodologies used to estimate improper payments did not result in accurate estimates. Finally, GAO noted that internal control weaknesses continued to plague programs susceptible to significant improper payments. From fiscal years 2004 through 2006, the number of agencies reporting recovery auditing information for contract overpayments and the dollar amounts identified for recovery and actually recovered increased. For fiscal year 2004, 12 agencies reported recovering about $53 million, compared to 18 agencies that reported recovering about $256 million for fiscal year 2006. Given the large volume and complexity of federal contract payments and historically low recovery rates for certain programs, GAO emphasized that it is much more efficient to pay bills properly in the first place. Effective internal control calls for a sound, ongoing invoice review and approval process as the first line of defense in preventing erroneous payments.
GAO-07-635T, Improper Payments: Agencies' Efforts to Address Improper Payment and Recovery Auditing Requirements Continue
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Testimony:
Before the Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security, Committee on
Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, March 29, 2007:
Improper Payments:
Agencies' Efforts to Address Improper Payment and Recovery Auditing
Requirements Continue:
Statement of McCoy Williams, Director:
Financial Management and Assurance:
GAO-07-635T:
GAO Highlights:
Highlights of GAO-07-635T, a testimony before the Subcommittee on
Federal Financial Management, Government Information, Federal Services,
and International Security, Committee on Homeland Security and
Governmental Affairs, U.S. Senate
Why GAO Did This Study:
The federal government is accountable for how its agencies and grantees
spend hundreds of billions of taxpayer dollars and is responsible for
safeguarding those funds against improper payments as well as for
recouping those funds when improper payments occur. The Congress
enacted the Improper Payments Information Act of 2002 (IPIA) and the
Recovery Auditing Act to address these issues. Fiscal year 2006 marked
the 3rd year that agencies were required to report improper payment and
recovery audit information in their Performance and Accountability
Reports.
GAO was asked to testify on the progress agencies have made in these
areas. Specifically, GAO focused on (1) trends in agencies‘ reporting
under IPIA from fiscal years 2004 through 2006, (2) challenges in
reporting improper payment information and improving internal control,
and (3) agencies‘ reporting of recovery auditing efforts. This
testimony is based on GAO‘s previous reports on agencies‘ efforts to
implement IPIA requirements for fiscal years 2005 and 2004 and current
review of available fiscal year 2006 improper payment and recovery
auditing information. The Office of Management and Budget (OMB)
provided technical comments that were incorporated as appropriate.
What GAO Found:
GAO identified several key trends related to IPIA reporting
requirements.
* Risk assessments. For fiscal years 2004 through 2006, some agencies
still had not instituted systematic methods of reviewing all programs
and activities or had not identified all programs susceptible to
significant improper payments. Further, certain agencies‘ risk
assessments appeared questionable. GAO also noted that OMB‘s recently
revised IPIA implementing guidance, which allows certain agencies to
perform risk assessments every 3 years instead of annually, may result
in fewer agencies conducting risk assessments in the future.
* Improper payment estimates. Since fiscal year 2004, agencies have
made some progress in reporting improper payment information. The
number of programs reporting improper payment estimates for fiscal year
2004 totaled 41, compared to 60 programs for fiscal year 2006. The
total improper payments dollar estimate was $45 billion in fiscal year
2004, $38 billion in fiscal year 2005, and about $42 billion in fiscal
year 2006.
* Noncompliance issues. Although not currently required by IPIA to do
so, some agency auditors continued to report problems related to
agencies' risk assessments, definition of programs for IPIA purposes,
sampling methodologies, lack of reporting for all risk-susceptible
programs, and supporting documentation.
Although showing progress under OMB‘s continuing leadership, agencies‘
fiscal year 2006 reporting under IPIA does not yet reflect the full
scope of improper payments. Major challenges remain in meeting the
goals of the act and ultimately improving the integrity of payments.
First, some agencies have not yet reported for all risk-susceptible
programs. For example, the fiscal year 2006 total improper payment
estimate of about $42 billion did not include any amounts for 13 risk-
susceptible programs that had fiscal year 2006 outlays totaling about
$329 billion. Second, certain methodologies used to estimate improper
payments did not result in accurate estimates. Finally, GAO noted that
internal control weaknesses continued to plague programs susceptible to
significant improper payments.
From fiscal years 2004 through 2006, the number of agencies reporting
recovery auditing information for contract overpayments and the dollar
amounts identified for recovery and actually recovered increased. For
fiscal year 2004, 12 agencies reported recovering about $53 million,
compared to 18 agencies that reported recovering about $256 million for
fiscal year 2006. Given the large volume and complexity of federal
contract payments and historically low recovery rates for certain
programs, GAO emphasized that it is much more efficient to pay bills
properly in the first place. Effective internal control calls for a
sound, ongoing invoice review and approval process as the first line of
defense in preventing erroneous payments.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-635T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact McCoy Williams at (202)
512-9095 or williamsm1@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the governmentwide problem of
improper payments in federal programs and activities and agencies'
efforts to address key requirements of the Improper Payments
Information Act of 2002 (IPIA)[Footnote 1] and Section 831 of the
National Defense Authorization Act for Fiscal Year 2002, commonly known
as the Recovery Auditing Act.[Footnote 2] Since fiscal year 2000, we
have issued a number of reports and testimonies aimed at raising the
level of attention given to improper payments. Our work over the past
several years has demonstrated that improper payments are a long-
standing, widespread, and significant problem in the federal
government. IPIA has increased visibility over improper
payments[Footnote 3] by requiring executive agency heads, based on
guidance from the Office of Management and Budget (OMB),[Footnote 4] to
identify programs and activities susceptible to significant improper
payments,[Footnote 5] estimate amounts improperly paid, and report on
the amounts of improper payments and their actions to reduce them.
Similarly, the Recovery Auditing Act provides an impetus for applicable
agencies to systematically identify and recover contract overpayments.
This act requires, among others things, that all executive branch
agencies entering into contracts with a total value exceeding $500
million in a fiscal year to have cost-effective programs for
identifying errors in paying contractors and for recovering amounts
erroneously paid. As the steward of taxpayer dollars, the federal
government is accountable for how its agencies and grantees spend
hundreds of billions of taxpayer dollars and is responsible for
safeguarding those funds against improper payments as well as having
mechanisms in place to recoup those funds when improper payments occur.
OMB has played a key role in the oversight of the governmentwide
improper payments problem. In 2005, OMB established Eliminating
Improper Payments as a new program-specific initiative under the
President's Management Agenda (PMA). This separate PMA program
initiative helps to ensure that agency managers are held accountable
for meeting the goals of IPIA and are, therefore, dedicating the
necessary attention and resources to meeting IPIA requirements. OMB
continues its commitment to identify all improper payments
governmentwide by working with agencies to establish corrective action
plans to address their root causes. OMB also annually reports[Footnote
6] on agencies' efforts to address IPIA and Recovery Auditing Act
requirements.
Today, my testimony will focus on three key areas:
* trends in agencies' reporting under IPIA for fiscal years 2004
through 2006,
* challenges in reporting improper payment information and improving
internal control, and:
* agencies' reporting of recovery auditing efforts to recoup improper
payments.
This testimony is based on our previous reports on agencies' efforts to
implement IPIA requirements for fiscal years 2005 and 2004[Footnote 7]
and our current review of available fiscal year 2006 improper payment
information reported by 36 of the 38 federal agencies that the
Department of the Treasury (Treasury) determined to be significant to
the U.S. government's consolidated financial statements. (See app. I
for a list of the 38 agencies.) The remaining 2 federal government
corporations have a different year-end reporting date and had not
issued their annual reports as of the end of our fieldwork. We reviewed
improper payment information reported in the 36 agencies' fiscal year
2006 performance and accountability reports (PAR) or annual reports. We
also reviewed OMB guidance on implementation of IPIA and the Recovery
Auditing Act and its annual report on agencies' efforts to identify and
reduce improper payments. In addition, we reviewed GAO reports and
agency Office of Inspector General (OIG) management challenges reports
to identify internal control weaknesses and program integrity issues
for agency programs reporting improper payment estimates for fiscal
year 2006. We did not independently validate the data that agencies
reported in their PARs or annual reports or the data that OMB reported.
However, we are providing agency-reported data as descriptive
information that will inform interested parties about the magnitude of
reported governmentwide improper payments and amounts recouped through
recovery audits and other improper payment-related information. We
believe the data to be sufficiently reliable for this purpose. We
provided information on the major findings discussed in this statement
to OMB. OMB provided technical comments that we have incorporated as
appropriate. We conducted our work in March 2007 in accordance with
generally accepted government auditing standards. Details on our scope
and methodology related to fiscal year 2005 and 2004 findings can be
found in our prior reports.[Footnote 8]
Significant Trends in IPIA Reporting:
I would now like to focus on agencies' efforts to address select IPIA
reporting requirements during the first 3 years of IPIA implementation,
fiscal years 2004 through 2006. Generally, agencies must perform four
key steps to address the improper payments reporting requirements--(1)
perform a risk assessment, (2) estimate improper payments for risk-
susceptible programs and activities, (3) implement a plan to reduce
improper payments for programs with estimates exceeding $10 million,
and (4) annually report improper payment estimates and actions to
reduce them. OMB requires the results of these steps to be reported in
the agencies' PARs, in the Management Discussion and Analysis section
and as a separate appendix, for each fiscal year ending on or after
September 30, 2004. Today, I will touch on progress made and challenges
that remain in these areas.
Risk Assessments:
Our past and current reviews of agencies' reported risk assessments
have raised questions regarding their adequacy. For fiscal years 2004
through 2006, we found that some agencies still had not instituted
systematic methods of reviewing all programs and activities or had not
identified all programs susceptible to significant improper payments.
We also reported that certain agencies' risk assessments appear
questionable. Conducting a risk assessment is an essential part of
agencies' efforts to comply with IPIA. Risk assessment is a key step in
helping to gain a reasonable level of assurance that programs are
operating as intended and that they are achieving their expected
outcomes. Done properly, it entails a comprehensive review and analysis
of program operations to determine if risks exist, what those risks
are, and the potential or actual effect of those risks on program
operations. The information developed during a risk assessment forms
the foundation or basis upon which management can determine the nature
and type of corrective actions needed. It also gives management
baseline information for measuring progress in reducing improper
payments.
* For the first year of reporting under IPIA, we reported in March
2005,[Footnote 9] that of the 29 agencies reviewed, 23 had completed
risk assessments for all programs and activities for fiscal year 2004.
However, for 3 of these, agencies' auditors raised noncompliance issues
with the risk assessments. For example, agency auditors for the
Department of Justice (DOJ) and the National Aeronautics and Space
Administration (NASA) reported that the risk assessments did not
consider all payment types or programs. The auditor for the Department
of Homeland Security (DHS) reported that the agency did not institute a
systematic method of reviewing all programs and identifying those it
believed were susceptible to significant erroneous payments.
* Regarding the second year of IPIA reporting, we reported in November
2006,[Footnote 10] that the same number of agencies, 23, had performed
risk assessments of all of their programs and activities based on our
review of 35 agency PARs or annual reports for fiscal year 2005.
Similar to the first year of IPIA reporting, we noted that auditors for
DOJ and DHS again raised noncompliance issues regarding the adequacy of
the agencies' risk assessments. We noted other risk assessment
deficiencies as well. For example, the Department of Agriculture (USDA)
OIG reported[Footnote 11] that the agency's risk assessments were not
adequate to estimate the agency's susceptibility to improper payments
because the guidance from the USDA's Office of the Chief Financial
Officer (OCFO) was not sufficiently prescriptive and detailed to
translate into meaningful results. As such, the OIG recommended that
the USDA OCFO strengthen guidance over its IPIA risk assessments to
provide reasonable assurance that the requirements of the act are met.
Further, the OIG stated that USDA should identify risk factors that are
discrete to the program being assessed and consider information from
all sources, such as audit reports.
* For fiscal year 2006, the third year of IPIA reporting, we found that
30 of the 36 agencies had reported performing some type of assessment
to identify programs and activities susceptible to significant improper
payments. The remaining 6 agencies either did not report improper
payments information in their PARs or annual reports, or did not report
assessing for risk of improper payments for all of their programs and
activities. Of the 30, 18 agencies reported reviewing all programs and
activities as part of the risk assessment process, while the remaining
12 agencies provided enough details that indicated some level of review
was performed. For example, 1 agency reported that it had evaluated its
major programs based on its developed risk criteria. Although the major
programs made up a significant portion of the agency's outlays, the
agency did not report that it had assessed the remaining programs and
activities. We also found instances where an agency's description of
the risk assessment performed contradicted its assertion that all
programs and activities had been reviewed. For example, 1 agency
reported in its PAR that it had assessed all programs and activities,
but also reported in the same PAR that assessments for two activities
had not been conducted. Another agency reported that it had assessed
all of its payment programs, but later stated in its PAR that its risk
assessment only covered certain types of programs.
Similar to the previous years, agency auditors continued to find
inadequacies in agencies' risk assessments for fiscal year 2006. The
DHS auditor reported that the agency did not perform a risk assessment
for all programs and activities. Further, the NASA auditor reported
that the agency had potentially violated certain requirements of IPIA
as NASA had been unable to provide the auditor with sufficient
documentation to support performance of an annual review of all
programs and activities that the agency administers.
Other agencies reported improving and refining their risk assessment
methodologies for fiscal year 2006. For example, USDA's Farm Service
Agency reported that it made improvements to its risk assessments and
as a result, four additional programs were determined to be susceptible
to significant improper payments. Two other agencies reported
redefining their programs to conduct their risk assessments. DOJ
reported that it addressed its noncompliance with IPIA by performing
risk assessments in its U.S. Marshals Service component. Other agencies
identified plans for improving future risk assessments. For example,
the Office of Personnel Management (OPM) reported that it will assess
in fiscal year 2007 whether any agency payment streams, other than its
former OMB Circular No. A-11 programs,[Footnote 12] are susceptible to
significant improper payments. The Department of Defense reported that
it is developing a program to review its intergovernmental payments and
payments for afloat and deployed forces. NASA reported that it plans to
perform a risk assessment of the agency's commercial and noncommercial
disbursement activities.
Finally, we noted that the number of agencies conducting risk
assessments may decrease in future reporting, because OMB's revised
IPIA implementing guidance allows agencies to perform risk assessments
every 3 years for those agency programs not deemed susceptible to
significant improper payments. Prior to issuing its revised
implementing guidance, OMB discussed the proposed changes with us. We
advised OMB that the provision to perform risk assessments every 3
years for those programs not deemed risk-susceptible was inconsistent
with the IPIA requirement for agencies to review all programs and
activities annually. In its fiscal year 2006 PAR, the General Services
Administration (GSA) reported that because it does not have any
programs or activities susceptible to significant improper payments,
GSA will perform the next risk assessment in fiscal year 2008.
Additionally, several programs included in OMB's former Circular No. A-
11, reported that OMB had granted them a waiver from improper payments
reporting because they did not have programs susceptible to significant
improper payments. These programs included the Environmental Protection
Agency's Clean and Drinking Water State Revolving Funds, the National
Science Foundation's Research and Education Grants and Cooperative
Agreements, and the Department of Veterans Affairs (VA) Insurance
programs. OMB's previous implementing guidance required agencies to
annually estimate improper payments for their programs that were
included in former Circular No. A-11, regardless of amount.
Improper Payment Dollar and Error Rate Estimates:
Since fiscal year 2004, agencies have made progress in reporting
improper payment information. For example, the number of programs
reporting improper payment estimates for fiscal year 2004 totaled 41,
as compared to 60 programs reporting for fiscal year 2006, a net
increase of 19 programs.[Footnote 13] The total improper payments
dollar estimate was $45 billion in fiscal year 2004, $38 billion in
fiscal year 2005, and about $42 billion[Footnote 14] in fiscal year
2006. (See app. II for further details.)
We have previously testified[Footnote 15] before this subcommittee
regarding the decrease in the total improper payment estimate from $45
billion in fiscal year 2004 to $38 billion in fiscal year 2005.
Specifically, we reported that the $7 billion decrease was primarily
attributable to a decrease in the Medicare estimate that resulted from
increased efforts to educate health care providers on the importance of
responding to requests for medical records to perform detailed
statistical reviews. Also, the Department of Health and Human Services
(HHS) extended the time that providers have for responding to
documentation requests from 55 days to 90 days. We further reported
that these changes primarily affected HHS's processes related to its
efforts to perform detailed statistical reviews for the purposes of
calculating an annual improper payment estimate for the Medicare
program. While this represents a refinement, it may not reflect
improved accountability over program dollars given that GAO continues
to designate the Medicare program as a high-risk area. Specifically, in
our January 2007 report,[Footnote 16] we reported that further action
must be taken to refine Medicare's payment methods and collection of
data used as a basis for setting payment rates and address program
integrity weaknesses, among others. Also, HHS's OIG continued to report
the integrity of Medicare payments as a top management challenge for
fiscal year 2006.
For fiscal year 2006, the total improper payment estimate increased to
about $42 billion from the reported $38 billion for fiscal year 2005.
The increase in improper payments was primarily attributable to 15
newly reported programs or activities totaling about $2.4 billion, and
a $1.6 billion increase in USDA's Marketing Assistance Loan program due
to improvements in how it measured its improper payments. In addition,
several programs experienced increases in their improper payment
estimates as a result of lax upfront eligibility controls to facilitate
rapid benefit delivery to victims devastated by Hurricane Katrina.
According to OMB, the programs most directly affected included the
Federal Emergency Management Agency's Individuals and Households
program (IHP), Department of Labor's (Labor) Disaster Unemployment
Insurance (UI) program, and the Small Business Administration's
Disaster Assistance Loan program. For example, Labor identified more
than $100 million in improper payments related to Hurricane Katrina for
the Disaster UI program. To respond to the challenges of the Gulf Coast
hurricanes, on August 29, 2006, the President signed Executive Order
13411, Improving Assistance for Disaster Victims, which established a
task force on disaster coordination responsible for recommending
specific actions to improve the delivery of federal disaster assistance
while strengthening controls designed to prevent improper payments and
other forms of fraud, waste, and abuse.
Mr. Chairman, I commend agencies' efforts to decrease improper payment
error rates. For example, from our review of agency programs initially
reporting error rates in the first year of IPIA implementation, fiscal
year 2004, we noted that of the 32 agency programs with changes in
their error rates, 18 program error rates, or 56 percent, had declined
when compared to fiscal year 2006. However, it should be noted that in
this still-early stage of IPIA implementation, a decrease in the
reported error rate may not signal improved accountability just as an
increase may not necessarily indicate a greater number of control
weaknesses. In some cases, these fluctuations may be attributed to
changes in the estimating methodology used. For example, USDA's
Marketing Assistance Loan program did not report an estimate in fiscal
year 2004 and reported a small estimate for fiscal year 2005. However,
with improvements in how it measures improper payments, this program
estimated an error rate of 20.3 percent for fiscal year 2006. The
Marketing Assistance Loan program is now in a greatly improved position
to identify the root causes of these errors and ultimately improve the
integrity of its payments--the primary goal of IPIA reporting.
Table 1 highlights improper payment error rates for the 8 major
programs that accounted for 86 percent of the $42 billion total
improper payment estimate for fiscal year 2006.
Table 1: Reported Improper Payment Error Rates for Major Programs for
Fiscal Years 2004 through 2006:
Agency: Health and Human Services;
Program: Medicare (Fee-for- Service component);
FY 2004: Error rate (percent): 10.1;
FY 2004: Estimate (dollars in billions): $21.7;
FY 2005: Error rate (percent): 5.2;
FY 2005: Estimate (dollars in billions): $12.1;
FY 2006: Error rate (percent): 4.4;
FY 2006: Estimate (dollars in billions): $10.8.
Agency: Department of the Treasury;
Program: Earned Income Tax Credit;
FY 2004: Error rate (percent): 24.5;
FY 2004: Estimate (dollars in billions): 9.7;
FY 2005: Error rate (percent): 25.5;
FY 2005: Estimate (dollars in billions): 10.5;
FY 2006: Error rate (percent): 25.5;
FY 2006: Estimate (dollars in billions): 10.7.
Agency: Department of Labor;
Program: Unemployment Insurance;
FY 2004: Error rate (percent): 10.3;
FY 2004: Estimate (dollars in billions): 3.9;
FY 2005: Error rate (percent): 10.1;
FY 2005: Estimate (dollars in billions): 3.3;
FY 2006: Error rate (percent): 10.7;
FY 2006: Estimate (dollars in billions): 3.4.
Agency: Social Security Administration;
Program: Old Age, Survivors, and Disability Insurance;
FY 2004: Error rate (percent): 0.3;
FY 2004: Estimate (dollars in billions): 1.7;
FY 2005: Error rate (percent): 0.7;
FY 2005: Estimate (dollars in billions): 3.7;
FY 2006: Error rate (percent): 0.6;
FY 2006: Estimate (dollars in billions): 3.3.
Agency: Social Security Administration;
Program: Supplemental Security Income Program;
FY 2004: Error rate (percent): 7.3;
FY 2004: Estimate (dollars in billions): 2.6;
FY 2005: Error rate (percent): 7.7;
FY 2005: Estimate (dollars in billions): 2.9;
FY 2006: Error rate (percent): 7.8;
FY 2006: Estimate (dollars in billions): 3.0.
Agency: Department of Agriculture;
Program: Food Stamp Program;
FY 2004: Error rate (percent): 6.6;
FY 2004: Estimate (dollars in billions): 1.6;
FY 2005: Error rate (percent): 5.9;
FY 2005: Estimate (dollars in billions): 1.4;
FY 2006: Error rate (percent): 5.8;
FY 2006: Estimate (dollars in billions): 1.6.
Agency: Department of Agriculture;
Program: Marketing Assistance Loan Program;
FY 2004: Error rate (percent): 0.0;
FY 2004: Estimate (dollars in billions): 0.0;
FY 2005: Error rate (percent): 0.7;
FY 2005: Estimate (dollars in billions): 0.5;
FY 2006: Error rate (percent): 20.3;
FY 2006: Estimate (dollars in billions): 1.6.
Agency: Housing and Urban Development;
Program: Public Housing/ Rental Assistance;
FY 2004: Error rate (percent): 6.9;
FY 2004: Estimate (dollars in billions): 1.7;
FY 2005: Error rate (percent): 5.6;
FY 2005: Estimate (dollars in billions): 1.5;
FY 2006: Error rate (percent): 5.4;
FY 2006: Estimate (dollars in billions): 1.5.
Total;
FY 2004: Error rate (percent): [Empty];
FY 2004: Estimate (dollars in billions): $42.9;
FY 2005: Error rate (percent): [Empty];
FY 2005: Estimate (dollars in billions): $35.9;
FY 2006: Error rate (percent): [Empty];
FY 2006: Estimate (dollars in billions): $35.9.
Estimate for all programs;
FY 2004: Error rate (percent): [Empty];
FY 2004: Estimate (dollars in billions): 45.4;
FY 2005: Error rate (percent): [Empty];
FY 2005: Estimate (dollars in billions): 38.4;
FY 2006: Error rate (percent): [Empty];
FY 2006: Estimate (dollars in billions): 41.6.
Major programs as a percent of total for all programs;
FY 2004: Error rate (percent): [Empty];
FY 2004: Estimate (dollars in billions): 94 percent;
FY 2005: Error rate (percent): [Empty];
FY 2005: Estimate (dollars in billions): 93 percent;
FY 2006: Error rate (percent): [Empty];
FY 2006: Estimate (dollars in billions): 86 percent.
Sources: GAO analysis of agencies' fiscal years 2004 to 2006 PARs and
OMB.
[End of table]
Noncompliance Issues with IPIA Continue:
Although they are not specifically required to do so by the act, some
agency auditors have reported on noncompliance issues related to
implementation of IPIA since the first year of IPIA reporting. For
example, for fiscal years 2004 and 2005, we reported[Footnote 17] that
agency auditors had identified instances of noncompliance, such as the
lack of a systematic method for reviewing all programs and risk
assessments that did not consider all payment types or programs. For
fiscal year 2006, agency auditors reported instances of noncompliance
such as an agency still being in its early stages of IPIA
implementation or not yet having reported for all risk-susceptible
programs.
We found that the level of noncompliance and types of issues raised
varied over the first 3 years of IPIA reporting. From our review of the
agency auditors' description of the noncompliance, we classified the
findings into three categories--full noncompliance, partial
noncompliance, and potential noncompliance. We noted that agency
auditors reported problems related to agencies' risk assessments, the
definition of programs for IPIA purposes, sampling methodologies, lack
of reporting for all risk-susceptible programs, and supporting
documentation, as shown in table 2. Fully addressing these matters
should lead to improved reporting under IPIA. Although IPIA does not
include a separate reporting requirement for auditors to assess
agencies' compliance, we noted that those that included this assessment
provided a valuable independent validation of agencies' efforts to
implement the act.
Table 2: Noncompliance Issues Reported by Some Agency Auditors for
Fiscal Years 2004 through 2006:
Category of noncompliance: Full noncompliance;
Fiscal year 2004: 3;
Fiscal year 2005: 2;
Fiscal year 2006: 1;
Type of noncompliance issue: Defining programs and activities, risk
assessment, sampling, early stages of IPIA implementation.
Category of noncompliance: Partial noncompliance;
Fiscal year 2004: 1;
Fiscal year 2005: 1;
Fiscal year 2006: 4;
Type of noncompliance issue: Not estimating for all risk-susceptible
programs, risk assessment, sampling.
Category of noncompliance: Potential noncompliance;
Fiscal year 2004: 0;
Fiscal year 2005: 0;
Fiscal year 2006: 1;
Type of noncompliance issue: Documentation does not support work
reportedly performed.
Category of noncompliance: Total;
Fiscal year 2004: 4;
Fiscal year 2005: 3;
Fiscal year 2006: 6;
Type of noncompliance issue: [Empty].
Source: GAO analysis.
[End of table]
From our analysis, we noted that four agencies[Footnote 18] had
reported noncompliance issues for at least 2 of the 3 IPIA reporting
years. For example, agency auditors for DHS have reported noncompliance
issues for the first 3 years of IPIA reporting. As mentioned earlier in
this testimony, the first 2 years of noncompliance were primarily
caused by inadequate risk assessments. For fiscal year 2006, DHS
auditors reported that the agency had not fully complied with IPIA due
to several inadequacies related to sampling methodologies, trained
staff, and monitoring of results to ensure testing was completed for
all required programs. DHS auditors recommended that the agency follow
OMB guidance for fiscal year 2007, including completing the necessary
susceptibility assessments, testing for all material programs, and
instituting sampling techniques to allow for statistical projection of
improper payments testing results.
Challenges Continue in Reporting Improper Payment Information and
Improving Internal Control:
While showing progress, agencies' fiscal year 2006 reporting under IPIA
does not yet reflect the full scope of improper payments across
executive branch agencies. Major challenges remain in meeting the goals
of the act and ultimately improving the integrity of payments.
Specifically, some agencies have not yet reported for all risk-
susceptible programs, and certain methodologies used to estimate
improper payments do not result in reliable estimates. Also, we noted
that management challenges related to agencies' internal control
weaknesses continue to plague programs susceptible to significant
improper payments.
Improper Payments Estimate Excludes Several Large Risk-Susceptible
Programs:
The fiscal year 2006 total improper payment estimate of about $42
billion did not include any amounts for 13 risk-susceptible programs
having fiscal year 2006 outlays totaling about $329 billion. The
Medicaid program represents the largest program that has not yet
reported, with reported outlays of about $183 billion. OMB had
specifically required 9 of these programs, including the Medicaid
program to report selected improper payment information for several
years before IPIA reporting requirements became effective. After
passage of IPIA, OMB's implementing guidance required that these
programs continue to report improper payment information under IPIA.
See table 3 for more detailed information.
Table 3: Risk-Susceptible Programs That Did Not Report Improper Payment
Estimates and Target Dates for Estimates:
Agency/program: Department of Agriculture--National School Lunch and
School Breakfast Programs (previously School Programs);
Fiscal year 2006 outlays (dollars in billions): $6.5;
Target date for improper payment estimate: 2007;
Previously required to estimate: X.
Agency/program: Federal Communications Commission--High Cost Support
Program;
Fiscal year 2006 outlays (dollars in billions): 3.8;
Target date for improper payment estimate: 2007;
Previously required to estimate: [Empty].
Agency/program: Federal Communications Commission--Universal Service
Fund's Schools and Libraries;
Fiscal year 2006 outlays (dollars in billions): 1.7;
Target date for improper payment estimate: 2007;
Previously required to estimate: [Empty].
Agency/program: Small Business Administration--504 Certified
Development Companies;
Fiscal year 2006 outlays (dollars in billions): 4.3;
Target date for improper payment estimate: 2007;
Previously required to estimate: X.
Agency/program: Department of Transportation--Airport Improvement
Program;
Fiscal year 2006 outlays (dollars in billions): 3.8;
Target date for improper payment estimate: 2007;
Previously required to estimate: X.
Agency/program: Department of Transportation--Capital Investments;
Fiscal year 2006 outlays (dollars in billions): 3.1;
Target date for improper payment estimate: 2007;
Previously required to estimate: X.
Agency/program: Department of Transportation--Formula Grants;
Fiscal year 2006 outlays (dollars in billions): 1.9;
Target date for improper payment estimate: 2007;
Previously required to estimate: X.
Agency/program: Department of Health and Human Services--Child Care and
Development Fund;
Fiscal year 2006 outlays (dollars in billions): 4.9;
Target date for improper payment estimate: 2008[A];
Previously required to estimate: X.
Agency/program: Department of Health and Human Services--Medicaid;
Fiscal year 2006 outlays (dollars in billions): 182.9;
Target date for improper payment estimate: 2008;
Previously required to estimate: X.
Agency/program: Department of Health and Human Services--State
Children's Insurance Program;
Fiscal year 2006 outlays (dollars in billions): 5.8;
Target date for improper payment estimate: 2008;
Previously required to estimate: X.
Agency/program: Department of Health and Human Services--Temporary
Assistance for Needy Families;
Fiscal year 2006 outlays (dollars in billions): 17.4;
Target date for improper payment estimate: 2008[A];
Previously required to estimate: X.
Agency/program: Department of Health and Human Services--Medicare
Advantage;
Fiscal year 2006 outlays (dollars in billions): 55.4;
Target date for improper payment estimate: Did not report a target
date;
Previously required to estimate: [Empty].
Agency/program: Department of Health and Human Services--Medicare
Prescription Drug Benefit;
Fiscal year 2006 outlays (dollars in billions): 37.4;
Target date for improper payment estimate: Did not report a target
date;
Previously required to estimate: [Empty].
Agency/program: Total;
Fiscal year 2006 outlays (dollars in billions): $328.9;
Target date for improper payment estimate: [Empty];
Previously required to estimate: 9.
Sources: OMB and cited agencies' fiscal year 2006 PARs.
[A] Although not reported in HHS's fiscal year 2006 PAR, according to
OMB, both the Child Care and Development Fund and Temporary Assistance
for Needy Families programs anticipate reporting a component error
measurement in HHS's fiscal year 2008 PAR.
[End of table]
Of these 13 programs, 11 reported that they would be able to estimate
and report on improper payments in the next 2 fiscal years, but could
not do so for fiscal year 2006. The remaining 2 programs were silent
about when they would report estimates in the future. As a result,
improper payment reporting of these programs susceptible to risk remain
unknown. OMB reported that some of the agencies were unable to
determine the rate or amount of improper payments because of
measurement challenges or time and resource constraints, which OMB
expects to be resolved in future reporting years. For example, since
fiscal year 2002, HHS has conducted pilots at the state level to
further its progress toward reporting a national improper payments
estimate for its Medicaid program. Each state is responsible for
designing and overseeing its own Medicaid program within the federal
government structure. This type of program structure presents
challenges for implementing a methodology to estimate improper payments
as HHS must work with states to obtain applicable documentation used in
the calculation. An additional challenge that HHS and other agencies
with state-administered programs say they face is the ability to hold
states accountable for meeting targets to reduce and recover improper
payments in the absence of specific statutory authority. In April 2006,
we reported[Footnote 19] on the need for federal and state coordination
to report national improper payment estimates on federal programs as
state-administered programs and other nonfederal entities receive over
$400 billion annually in federal funds. Thus, federal agencies and
states share a responsibility for the prudent use of these funds.
Certain Methodologies Used to Estimate Improper Payments Do Not Result
in Accurate Estimates:
We have previously noted that agencies employed different sampling
methodologies to estimate improper payments, including statistical
sampling, nonstatistical sampling, or a combination of the two. OMB's
implementing guidance requires that agencies generally use a
statistical sample to estimate improper payments. Agencies may also use
an alternative sampling approach provided they obtain OMB approval
prior to implementation. The advantage of using statistical sampling is
that sample results can be generalized to the entire population from
which the sample was taken. Based on our review of fiscal year 2006
reporting, we found seven agencies that did not use statistical
sampling to estimate improper payments for nine programs totaling about
$202 million, with program outlays exceeding $88 billion. Given that
total outlays for these nine risk-susceptible programs exceeded $88
billion for fiscal year 2006, the improper payment estimate for these
programs would likely have been much greater had statistically valid
methods been used.
For example, Labor analyzed fiscal year 2004 audits done under the
Single Audit Act,[Footnote 20] as amended, to identify questioned costs
for its Workforce Investment Act[Footnote 21] program, which, in turn,
were used as a proxy for reporting its improper payment estimate.
Specifically, the improper payment rate was determined by calculating
the projected questioned costs and dividing this total amount by the
corresponding outlays. Using this methodology, Labor reported a $6.4
million improper payment estimate for fiscal year 2006. We do not
believe this is a reasonable proxy for improper payment levels because
single audits, by themselves, may lack the level of detail necessary
for achieving IPIA compliance. Specifically, single audits generally
focus on the largest dollars in an auditee's portfolio. Thus, all
programs identified as susceptible to improper payments at the federal
level may not receive extensive coverage under a single audit.
Consequently, both the depth and level of detail of single audit
results are, generally, insufficient to identify improper payments,
estimate improper payments, or both. We noted that Labor's OIG reported
the use of single audits as a major management challenge because
serious deficiencies in single audits, including inadequate sampling
methodologies have been reported, thus making them unreliable for
purposes of estimating improper payments.
We also found that five agencies used a combination of statistical and
nonstatistical sampling methods to estimate improper payments totaling
about $11.6 billion for ten programs. For example, VA reported that
improper payment estimates for its Compensation and Pension programs
are based on statistical sampling of its quality assurance program
together with actual amounts of debt incurred that are referred to the
VA Debt Management Center. In another example, the Railroad Retirement
Board (RRB) reported that improper payment estimates for its Retirement
and Survivors Benefits program and Railroad Unemployment Insurance
Benefits program were based on a statistical sample of railroad
retirement awards and unemployment and sickness insurance claims as
well as special studies and audits that were not entirely statistically
based. In its fiscal year 2006 PAR, RRB reported that in May 2005, its
general counsel issued a legal opinion that since the levels of
improper payments did not exceed OMB's designated thresholds--exceeding
$10 million and 2.5 percent of program payments--the agency was not
required to conduct statistical sampling. We noted that both of these
programs were required to report improper payment information for
several years before IPIA reporting requirements became effective.
After passage of IPIA, OMB's implementing guidance required that these
programs continue to report improper payment information under IPIA,
including using statistical sampling to estimate improper payments.
In addition, we noted instances where agencies estimated improper
payments for only one component of the risk-susceptible program. For
example, HHS's Medicare program is the largest of the programs
constituting the total improper payment estimate, with an estimate of
$10.8 billion for fiscal year 2006. However, this estimate represents
payment errors only for its fee-for-service program component. HHS has
not yet begun to estimate improper payments for its managed care
component (also known as Medicare Advantage), with outlays totaling
about $55 billion, or 14 percent of Medicare program outlays. HHS's
auditor, an independent public accounting firm that audited its
financial statements for fiscal year 2006, identified Medicare's
managed care benefits payment cycle as a reportable condition in its
report on internal controls. The auditor found that HHS lacks a
comprehensive control environment in which the risk of inaccurate
payments is not sufficiently mitigated. Specifically, HHS had
inadequate procedures to review and process managed care payments,
lacked documentation and procedures to determine eligibility of new
providers, and provided inadequate oversight of managed care
organizations. In its fiscal year 2006 PAR, HHS reported that a
methodology to estimate improper payments for the Medicare Advantage
program was in the initial stage of development. During fiscal year
2007, HHS plans to perform a comprehensive risk assessment for the
Medicare Advantage program to determine potential areas vulnerable to
payment errors. HHS anticipates reporting on the measurement project
and select findings in its fiscal year 2008 PAR. However, HHS has not
yet provided a target date for reporting an improper payment estimate
for its Medicare Advantage program.
Improved Internal Control Is Key to Resolving Improper Payments:
Agency OIGs reported management challenges in the annual PARs related
to agencies' internal control weaknesses that continue to plague
programs susceptible to significant improper payments. In accordance
with OMB Circular No. A-136, OIGs are required to highlight issues that
the OIGs consider to be the most serious management and performance
challenges facing agencies. Management challenges involving internal
control have a direct effect on program integrity and improper payment
issues, and thus a review of the OIGs' statements on management
challenges can be instructive in this regard. Generally, improper
payments result from a lack of or an inadequate system of internal
control, but some result from program design issues.
Internal control is a major part of managing an organization. It
comprises the plans, methods, and procedures used to meet missions,
goals, and objectives and supports performance-based management.
Internal control also serves as the first line of defense in
safeguarding assets and preventing and detecting errors and fraud. Our
Standards for Internal Control in the Federal Government provide a road
map for entities to establish control for all aspects of their
operations and a basis against which entities' control structures can
be evaluated.[Footnote 22] Also, our executive guide on strategies to
manage improper payments focuses on internal control standards as they
relate to reducing improper payments.[Footnote 23]
We found that over half of the programs reporting improper payment
estimates also had reported management challenges that could increase
the risk of improper payments, including challenges related to internal
controls. For example, in the Department of Education's (Education)
fiscal year 2006 PAR, the Education OIG reported that recent audits,
inspections, and investigations continue to uncover problems with
program control and oversight of program participants, placing billions
of taxpayer dollars at risk of waste, fraud, abuse, and noncompliance.
The OIG concluded that only by improving effective oversight of its
operations and demanding accountability by its managers, staff,
contractors, and grantees can the agency be an effective steward of the
billions of taxpayer dollars supporting its programs and operations.
Education's OIG also reported that identifying and correcting improper
payments remains a challenge for the agency due to ineffective
oversight and monitoring of its policies, programs, and participants.
Another example involved an agency's systems used to detect fraudulent
activity. Specifically, Treasury's OIG reported that some tax credits,
such as the Earned Income Tax Credit, provide opportunities for abuse
in income tax claims. In past years, the Internal Revenue Service (IRS)
used its Web-based Electronic Fraud Detection System (EFDS) to search
for signs of fraud at the time that tax returns are filed to help
eliminate the issuing of questionable refunds. For its 2005 processing
year,[Footnote 24] IRS stopped over $412 million in improper payments.
However, IRS was unable to utilize EFDS for the 2006 processing
year[Footnote 25] because the contractor it had hired to update the
fraud detection program could not produce a working program within the
established timeframe. Because IRS believed that the contractor would
deliver the updated program, it had not developed a contingency plan
nor taken any action to return to the old system. As a result, the
Treasury OIG reported that more than $300 million in fraudulent refunds
may have been issued in 2006. We identified this issue as a material
weakness during our audit of IRS's fiscal years 2005 and 2006 financial
statements.[Footnote 26]
Agencies' Reporting of Recovery Auditing Information:
Section 831 of the National Defense Authorization Act for Fiscal Year
2002 provides an impetus for applicable agencies to systematically
identify and recover contract overpayments. The act requires that
agencies that enter into contracts with a total value in excess of $500
million in a fiscal year carry out a cost-effective program for
identifying and recovering amounts erroneously paid to contractors. The
law authorizes federal agencies to retain recovered funds to cover in-
house administrative costs as well as to pay contractors, such as
collection agencies. Any residual recoveries, net of these program
costs, shall be credited back to the original appropriation from which
the improper payment was made, subject to restrictions as described in
the legislation.
Recovery auditing is a method that agencies can use to recoup detected
improper payments. Recovery auditing is a detective control to help
determine whether contractor costs were proper. Specifically, it
focuses on the identification of erroneous invoices, discounts offered
but not received, improper late penalty payments, incorrect shipping
costs, and multiple payments for single invoices. Recovery auditing can
be conducted in-house or contracted out to recovery audit firms. The
techniques used in recovery auditing offer the opportunity for
identifying weaknesses in agency internal controls, which can be
modified or upgraded to be more effective in preventing improper
payments before they occur for subsequent contract outlays.
I would like to emphasize that effective internal control calls for a
sound, ongoing invoice review and approval process as the first line of
defense in preventing unallowable contract costs. Given the large
volume and complexity of federal payments and historically low recovery
rates for certain programs, it is much more efficient and effective to
pay bills and provide benefits properly in the first place. Prevention
is always preferred to detection and collection. Aside from minimizing
overpayments, preventing improper payments increases public confidence
in the administration of benefit programs and avoids the difficulties
associated with the "pay and chase" aspects of recovering improper
payments. Without strong preventive controls, agencies' internal
control activities over payments to contractors will not be effective
in reducing the risk of improper payments.
Beginning with fiscal year 2004, OMB required that applicable agencies
publicly report on their recovery auditing efforts as part of their PAR
reporting of improper payment information. Agencies are required to
discuss any contract types excluded from review and justification for
doing so. Agencies are also required to report, in table format,
various amounts related to contracts subject to review and actually
reviewed, contract amounts identified for recovery and actually
recovered, and prior year amounts.
From fiscal year 2004 to 2006, we noted that the number of agencies
reporting recovery auditing information and the dollar amounts
identified for recovery and actually recovered had increased, as shown
in table 4.
Table 4: Improper Payment Amounts Identified and Recovered for Fiscal
Years 2004 to 2006:
1;
Department or agency: Agency for International Development;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
$5,900,000;
Fiscal year 2005: Agency-reported amount recovered: $5,782,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
$17,100,000;
Fiscal year 2006: Agency-reported amount recovered: $17,090,000.
2;
Department or agency: Department of Agriculture;
Fiscal year 2004: Agency-reported amount identified for recovery:
$2,000;
Fiscal year 2004: Agency-reported amount recovered: $2,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
333,000;
Fiscal year 2005: Agency-reported amount recovered: 189,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
379,000;
Fiscal year 2006: Agency-reported amount recovered: 538,000[A].
3;
Department or agency: Department of Commerce;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
96,354;
Fiscal year 2005: Agency-reported amount recovered: 84,551;
Fiscal year 2006: Agency-reported amount identified for recovery:
96,000;
Fiscal year 2006: Agency-reported amount recovered: 96,000.
4;
Department or agency: Department of Defense;
Fiscal year 2004: Agency-reported amount identified for recovery:
6,300,000;
Fiscal year 2004: Agency-reported amount recovered: 6,300,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
473,000,000;
Fiscal year 2005: Agency-reported amount recovered: 418,500,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
195,300,000;
Fiscal year 2006: Agency-reported amount recovered: 137,900,000.
5;
Department or agency: Department of Education;
Fiscal year 2004: Agency-reported amount identified for recovery:
269,000;
Fiscal year 2004: Agency-reported amount recovered: 79,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
274,367;
Fiscal year 2005: Agency-reported amount recovered: 112,506;
Fiscal year 2006: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2006: Agency-reported amount recovered: did not report.
6;
Department or agency: Department of Energy;
Fiscal year 2004: Agency-reported amount identified for recovery:
6,000,000;
Fiscal year 2004: Agency-reported amount recovered: 6,000,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
10,600,000;
Fiscal year 2005: Agency-reported amount recovered: 9,500,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
11,900,000;
Fiscal year 2006: Agency-reported amount recovered: 10,300,000.
7;
Department or agency: Environmental Protection Agency;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
130,000;
Fiscal year 2005: Agency-reported amount recovered: 130,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
1,102,000;
Fiscal year 2006: Agency-reported amount recovered: 0[B].
8;
Department or agency: General Services Administration;
Fiscal year 2004: Agency-reported amount identified for recovery:
14,409,000;
Fiscal year 2004: Agency-reported amount recovered: 11,117,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
26,638,654;
Fiscal year 2005: Agency-reported amount recovered: 8,317,187;
Fiscal year 2006: Agency-reported amount identified for recovery:
46,721,742;
Fiscal year 2006: Agency-reported amount recovered: 45,917,920.
9;
Department or agency: Department of Health and Human Services;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
2,100,000;
Fiscal year 2005: Agency-reported amount recovered: 14,430;
Fiscal year 2006: Agency-reported amount identified for recovery:
1,600,000[C];
Fiscal year 2006: Agency-reported amount recovered: 40,000[C].
10;
Department or agency: Department of Homeland Security;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
2,191,000;
Fiscal year 2005: Agency-reported amount recovered: 1,207,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
502,000,000[C];
Fiscal year 2006: Agency-reported amount recovered: 6,016,000[C].
11;
Department or agency: Department of Housing and Urban Development;
Fiscal year 2004: Agency-reported amount identified for recovery:
227,000;
Fiscal year 2004: Agency-reported amount recovered: 40,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
reported not cost beneficial;
Fiscal year 2005: Agency-reported amount recovered: reported not cost
beneficial;
Fiscal year 2006: Agency- reported amount identified for recovery:
reported not cost beneficial;
Fiscal year 2006: Agency-reported amount recovered: reported not cost
beneficial.
12;
Department or agency: Department of the Interior;
Fiscal year 2004: Agency-reported amount identified for recovery:
231,000;
Fiscal year 2004: Agency-reported amount recovered: 231,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
1,548,620;
Fiscal year 2005: Agency-reported amount recovered: 195,479;
Fiscal year 2006: Agency-reported amount identified for recovery:
4,407,345;
Fiscal year 2006: Agency-reported amount recovered: 505,743.
13;
Department or agency: Department of Justice;
Fiscal year 2004: Agency-reported amount identified for recovery:
973,000;
Fiscal year 2004: Agency-reported amount recovered: 780,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
1,044,320;
Fiscal year 2005: Agency-reported amount recovered: 765,086;
Fiscal year 2006: Agency-reported amount identified for recovery:
1,851,709;
Fiscal year 2006: Agency-reported amount recovered: 1,734,421.
14;
Department or agency: Department of Labor;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
reported not cost beneficial;
Fiscal year 2005: Agency-reported amount recovered: reported not cost
beneficial;
Fiscal year 2006: Agency-reported amount identified for recovery:
reported not cost beneficial;
Fiscal year 2006: Agency-reported amount recovered: reported not cost
beneficial.
15;
Department or agency: National Aeronautics and Space Administration;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
617,442;
Fiscal year 2005: Agency-reported amount recovered: 617,442;
Fiscal year 2006: Agency-reported amount identified for recovery:
256,255;
Fiscal year 2006: Agency-reported amount recovered: 139,420.
16;
Department or agency: Social Security Administration;
Fiscal year 2004: Agency-reported amount identified for recovery:
5,000;
Fiscal year 2004: Agency-reported amount recovered: 5,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
317,000;
Fiscal year 2005: Agency-reported amount recovered: 50,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
178,000;
Fiscal year 2006: Agency-reported amount recovered: 178,000.
17;
Department or agency: Department of State;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
5,350,000;
Fiscal year 2005: Agency-reported amount recovered: 5,190,000;
Fiscal year 2006: Agency-reported amount identified for recovery:
2,397,200;
Fiscal year 2006: Agency-reported amount recovered: 2,276,700.
18;
Department or agency: Tennessee Valley Authority;
Fiscal year 2004: Agency-reported amount identified for recovery: did
not report;
Fiscal year 2004: Agency-reported amount recovered: did not report;
Fiscal year 2005: Agency-reported amount identified for recovery:
909,573;
Fiscal year 2005: Agency-reported amount recovered: 443,763;
Fiscal year 2006: Agency-reported amount identified for recovery:
6,793,581[D];
Fiscal year 2006: Agency-reported amount recovered: 1,202,651.
19;
Department or agency: Department of Transportation;
Fiscal year 2004: Agency-reported amount identified for recovery:
216,000;
Fiscal year 2004: Agency-reported amount recovered: 216,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
2,663,984;
Fiscal year 2005: Agency-reported amount recovered: 2,663,984;
Fiscal year 2006: Agency-reported amount identified for recovery:
6,450,993;
Fiscal year 2006: Agency-reported amount recovered: 45,109.
20;
Department or agency: Department of the Treasury;
Fiscal year 2004: Agency-reported amount identified for recovery:
855,000;
Fiscal year 2004: Agency-reported amount recovered: 669,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
428,977;
Fiscal year 2005: Agency-reported amount recovered: 364,680;
Fiscal year 2006: Agency-reported amount identified for recovery:
2,305,424;
Fiscal year 2006: Agency-reported amount recovered: 1,442,708.
21;
Department or agency: Department of Veterans Affairs;
Fiscal year 2004: Agency-reported amount identified for recovery:
29,500,000;
Fiscal year 2004: Agency-reported amount recovered: 27,300,000;
Fiscal year 2005: Agency-reported amount identified for recovery:
23,001,137;
Fiscal year 2005: Agency-reported amount recovered: 12,957,264;
Fiscal year 2006: Agency-reported amount identified for recovery:
39,155,454;
Fiscal year 2006: Agency-reported amount recovered: 30,378,423.
Total;
Fiscal year 2004: Agency-reported amount identified for recovery:
$58,987,000;
Fiscal year 2004: Agency- reported amount recovered: $52,739,000;
Fiscal year 2005: Agency- reported amount identified for recovery:
$557,144,428;
Fiscal year 2005: Agency-reported amount recovered: $467,084,372;
Fiscal year 2006: Agency-reported amount identified for recovery:
$839,994,703;
Fiscal year 2006: Agency-reported amount recovered: $255,801,095.
[End of table]
Sources: OMB and agencies' fiscal year 2005 and 2006 PARs.
[A] According to USDA, amount recovered in fiscal year 2006 include
some recoveries identified in fiscal year 2005.
[B] Agency did not report an amount recovered in its par. According to
OMB, only four improper payments were identified and dollars were not
statistically significant.
[C] We obtained this amount from OMB.
[D] This amount represents the agency-reported amount of $1,208,498 and
an additional $5,585,083 identified from Tennessee Valley Authority's
(TVA) OIG contract compliance audits, which is also included in the
annual report. TVA noted that there is a partial overlap between these
two amounts, but could not identify the overlapped amount.
[End of table]
We are pleased that progress has been made over the past 3 fiscal years
to identify amounts for recovery and those amounts actually recovered.
We also noted that the rate of recovery of contract overpayments for
fiscal year 2006, about 30 percent, had substantially decreased from
the prior year reported recovery rate of 84 percent. In our November
2006 report,[Footnote 27] we raised questions regarding the overall
high recovery rate of 84 percent and found discrepancies, such as the
contract costs identified for recovery were considerably lower than the
corresponding OIG amount identified from that year's audit reviews. We
determined that the discrepancies significantly decreased the overall
recovery rate from 84 percent to 22 percent. Although we have not
performed a detailed review of the agencies' recovery rates for fiscal
year 2006, the reported overall recovery rate of 30 percent may provide
a more realistic view of agencies' recovery audit efforts.
From our review, we noted that 12 agencies reported recovering about
$53 million for fiscal year 2004 compared to 18 agencies that reported
recovering about $256 million for fiscal year 2006. In addition to the
18 agencies, we found that 3 agencies--Education, the Department of
Housing and Urban Development (HUD), and Labor--did not report recovery
auditing information for fiscal year 2006. Education reported that it
reviewed all of its vendor payments from fiscal years 1998 to 2005 and
found that potential recoveries were minimal. During fiscal year 2007,
Education plans to review fiscal year 2006 contract payments. Education
also noted that its purchase card and travel card programs are subject
to monthly reviews and reconciliations to identify potential misuse or
abuse. HUD and Labor reported that based on their recovery audit
results, a recovery auditing program was not cost-beneficial or
necessary, similar to what they reported for fiscal year 2005.
Specifically, in fiscal year 2006, HUD reported that its recovery audit
contractor had determined that procedures and systems in place provide
strong controls for processing contract payments. Labor reported that
from its statistical sample of 50 transactions, no improper payments
were found, and therefore recovery audit efforts were not necessary. In
addition, we noted that of the 18 agencies reporting for fiscal year
2006, 3 agencies had conducted in-house recovery audits, 8 agencies
reported they contracted out their recovery audit services, another 6
agencies reported using both in-house and recovery audit contractors to
perform recovery auditing, and the remaining 1 agency was silent.
Concluding Observations:
In closing, we recognize that measuring improper payments and designing
and implementing actions to reduce them are not simple tasks and will
not be easily accomplished. Further, while internal control should be
maintained as the front-line defense against improper payments,
recovery auditing holds promise as a cost-effective means of
identifying contractor overpayments.
Given today's budgetary pressures and the American public's increasing
demands for accountability over taxpayer funds, oversight hearings such
as this one today and the continuing leadership of OMB under the PMA,
help keep agencies focused on the goals of IPIA and being accountable
for results. Preventing, identifying, and recovering improper payments
in that order are what is needed across government. Fulfilling the
requirements of IPIA will require sustained attention to implementation
and oversight to monitor whether desired results are being achieved.
Mr. Chairman, this concludes my statement. I would be pleased to
respond to any questions that you or other members of the subcommittee
may have.
Contact and Acknowledgments:
For more information regarding this testimony, please contact McCoy
Williams, Director, Financial Management and Assurance, at (202) 512-
9095 or by e-mail at williamsm1@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this testimony. Individuals making key contributions to this
testimony included Carla Lewis, Assistant Director; Francine
DelVecchio; Christina Quattrociocchi; Heather Rasmussen; Donell Ries;
and Viny Talwar.
[End of section]
Appendix I: Agencies and Related Programs Included in Our Review of
Fiscal Year 2006 Performance and Accountability Reports and Annual
Reports:
Table 5:
1;
department or agency: Agency for International Development;
1;
Program or activity: Cash Transfers.
1;
Department or agency: Agency for International Development;
2;
Program or activity: Cooperative Agreements, Grants, and Contracts.
2;
Department or agency: Department of Agriculture;
3;
Program or activity: Child and Adult Care Food Program.
2;
Department or agency: Department of Agriculture;
4;
Program or activity: Conservation Reserve Program.
2;
Department or agency: Department of Agriculture;
5;
Program or activity: Department or agency: Direct and Counter-Cyclical
Payments.
2;
Department or agency: Department of Agriculture;
6;
Program or activity: Department or agency: Disaster Programs.
2;
Department or agency: Department of Agriculture;
7;
Program or activity: Department or agency: Farm Security and Rural
Investment.
2;
Department or agency: Department of Agriculture;
8;
Program or activity: Department or agency: Federal Crop Insurance
Corporation.
2;
Department or agency: Department of Agriculture;
9;
Program or activity: Department or agency: Food Stamp Program.
2;
Department or agency: Department of Agriculture;
10;
Program or activity: Department or agency: Loan Deficiency Payments.
2;
Department or agency: Department of Agriculture;
11;
Program or activity: Department or agency: Marketing Assistance Loan
Program.
2;
Department or agency: Department of Agriculture;
12;
Program or activity: Department or agency: Milk Income Loss Contract
Program.
2;
Department or agency: Department of Agriculture;
13;
Program or activity: Department or agency: National School Lunch and
School Breakfast Programs (previously School Programs).
2;
Department or agency: Department of Agriculture;
14;
Program or activity: Department or agency: Noninsured Assistance
Program.
2;
Department or agency: Department of Agriculture;
15;
Program or activity: Department or agency: Rental Assistance Program.
2;
Department or agency: Department of Agriculture;
16;
Program or activity: Wildland Fire Suppression Management.
2;
Department or agency: Department of Agriculture;
17;
Program or activity: Women, Infants, and Children.
3;
Department or agency: Department of Commerce;
18;
Program or activity: All programs and activities.
4;
Department or agency: Department of Defense;
19;
Program or activity: Civilian Pay.
4;
Department or agency: Department of Defense;
20;
Program or activity: Commercial Pay.
4;
Department or agency: Department of Defense;
21;
Program or activity: Military Health Benefits.
4;
Department or agency: Department of Defense;
22;
Program or activity: Military Pay.
4;
Department or agency: Department of Defense;
23;
Program or activity: Military Retirement Fund.
4;
Department or agency: Department of Defense;
24;
Program or activity: Travel Pay.
5;
Department or agency: Department of Education;
25;
Program or activity: Student Financial Assistance--Federal Family
Education Loan.
5;
Department or agency: Department of Education;
26;
Program or activity: Student Financial Assistance--Pell Grants.
5;
Department or agency: Department of Education;
27;
Program or activity: Title I.
6;
Department or agency: Department of Energy;
28;
Program or activity: Payment programs.
7;
Department or agency: Environmental Protection Agency;
29;
Program or activity: Clean Water State Revolving Funds.
7;
Department or agency: Environmental Protection Agency;
30;
Program or activity: Drinking Water State Revolving Funds.
8;
Department or agency: Export-Import Bank of the United States;
31;
Program or activity: All programs and activities.
9;
Department or agency: Farm Credit System Insurance Corporation[A];
32;
Program or activity: All programs and activities.
10;
Department or agency: Federal Communications Commission;
33;
Program or activity: High Cost Support Program.
10;
Department or agency: Federal Communications Commission;
34;
Program or activity: Universal Service Fund's Schools and Libraries.
11;
Department or agency: Federal Deposit Insurance Corporation;
35;
Program or activity: All programs and activities.
12;
Department or agency: Federal Trade Commission;
36;
Program or activity: All programs and activities.
13;
Department or agency: General Services Administration;
37;
Program or activity: All programs and activities.
14;
Department or agency: Department of Health and Human Services;
38;
Program or activity: Child Care and Development Fund.
14;
Department or agency: Department of Health and Human Services;
39;
Program or activity: Foster Care--Title IV-E.
14;
Department or agency: Department of Health and Human Services;
40;
Program or activity: Head Start.
14;
Department or agency: Department of Health and Human Services;
41;
Program or activity: Medicaid.
14;
Department or agency: Department of Health and Human Services;
42;
Program or activity: Medicare Advantage.
14;
Department or agency: Department of Health and Human Services;
43;
Program or activity: Medicare Fee-for-Service.
14;
Department or agency: Department of Health and Human Services;
44;
Program or activity: Medicare Prescription Drug Benefit.
14;
Department or agency: Department of Health and Human Services;
45;
Program or activity: State Children's Insurance Program.
14;
Department or agency: Department of Health and Human Services;
46;
Program or activity: Temporary Assistance for Needy Families.
15;
Department or agency: Department of Homeland Security;
47;
Program or activity: Individuals and Households Program.
15;
Department or agency: Department of Homeland Security;
48;
Program or activity: Vendor Payments.
16;
Department or agency: Department of Housing and Urban Development;
49;
Program or activity: Community Development Block Grant.
16;
Department or agency: Department of Housing and Urban Development;
50;
Program or activity: Federal Housing Administration's Single Family
Acquired Asset Management System.
16;
Department or agency: Department of Housing and Urban Development;
51;
Program or activity: Low Income Public Housing.
16;
Department or agency: Department of Housing and Urban Development;
52;
Program or activity: Public Housing Capital Fund.
16;
Department or agency: Department of Housing and Urban Development;
53;
Program or activity: Section 8--Project Based.
16;
Department or agency: Department of Housing and Urban Development;
54;
Program or activity: Section 8-- Tenant Based.
17;
Department or agency: Department of the Interior;
55;
Program or activity: All programs and activities.
18;
Department or agency: Department of Justice;
56;
Program or activity: All programs and activities.
19;
Department or agency: Department of Labor;
57;
Program or activity: Federal Employees' Compensation Act.
19;
Department or agency: Department of Labor;
58;
Program or activity: Unemployment Insurance.
19;
Department or agency: Department of Labor;
59;
Program or activity: Workforce Investment Act.
20;
Department or agency: National Aeronautics and Space Administration;
60;
Program or activity: All programs and activities.
21;
Department or agency: National Archives and Records Administration;
61;
Program or activity: All programs and activities.
22;
Department or agency: National Credit Union Administration[A];
62;
Program or activity: All programs and activities.
23;
Department or agency: National Science Foundation;
63;
Program or activity: Research and Education Grants and Cooperative
Agreements.
24;
Department or agency: National Transportation Safety Board;
64;
Program or activity: All programs and activities.
25;
Department or agency: Nuclear Regulatory Commission;
65;
Program or activity: All programs and activities.
26;
Department or agency: Office of Personnel Management;
66;
Program or activity: Federal Employees Group Life Insurance.
26;
Department or agency: Office of Personnel Management;
67;
Program or activity: Federal Employees Health Benefits Program.
26;
Department or agency: Office of Personnel Management;
68;
Program or activity: Retirement Program (Civil Service Retirement
System and Federal Employees Retirement System).
27;
Department or agency: Pension Benefit Guaranty Corporation;
69;
Program or activity: All programs and activities.
28;
Department or agency: U.S. Postal Service;
70;
Program or activity: All programs and activities.
29;
Department or agency: Railroad Retirement Board;
71;
Program or activity: Railroad Unemployment Insurance Benefits.
29;
Department or agency: Railroad Retirement Board;
72;
Program or activity: Retirement and Survivors Benefits.
30;
Department or agency: Securities and Exchange Commission;
73;
Program or activity: All programs and activities.
31;
Department or agency: Small Business Administration;
74;
Program or activity: 504 Certified Development Companies.
31;
Department or agency: Small Business Administration;
75;
Program or activity: 7(a) Business Loan Program.
31;
Department or agency: Small Business Administration;
76;
Program or activity: Disaster Assistance.
31;
Department or agency: Small Business Administration;
77;
Program or activity: Small Business Investment Companies.
32;
Department or agency: Smithsonian Institution;
78;
Program or activity: All programs and activities.
33;
Department or agency: Social Security Administration;
79;
Program or activity: Old Age and Survivors' Insurance.
33;
Department or agency: Social Security Administration;
80;
Program or activity: Disability Insurance.
33;
Department or agency: Social Security Administration;
81;
Program or activity: 34: Supplemental Security Income Program.
34;
Department or agency: Department of State;
82;
Program or activity: International Information Program--U.S. Speaker
Specialist Program.
34;
Department or agency: Department of State;
83;
Program or activity: International Narcotic and Law Enforcement
Affairs--Narcotics Program.
34;
Department or agency: Department of State;
84;
Program or activity: Structures and Equipment.
34;
Department or agency: Department of State;
85;
Program or activity: Vendor payments.
35;
Department or agency: Tennessee Valley Authority;
86;
Program or activity: Payment programs.
36;
Department or agency: Department of Transportation;
87;
Program or activity: Airport Improvement Program.
36;
Department or agency: Department of Transportation;
88;
Program or activity: Federal Transit--Capital Investment Grants.
36;
Department or agency: Department of Transportation;
89;
Program or activity: Federal Transit--Formula Grants.
36;
Department or agency: Department of Transportation;
90;
Program or activity: Highway Planning and Construction.
37;
Department or agency: Department of the Treasury;
91;
Program or activity: Earned Income Tax Credit.
38;
Department or agency: Department of Veterans Affairs;
92;
Program or activity: Compensation.
38;
Department or agency: Department of Veterans Affairs;
93;
Program or activity: Dependency and Indemnity Compensation.
38;
Department or agency: Department of Veterans Affairs;
94; Program or activity: Education programs.
38;
Department or agency: Department of Veterans Affairs;
95;
Program or activity: Department or agency: Insurance programs.
38;
Department or agency: Department of Veterans Affairs;
96;
Program or activity: Loan Guaranty.
38;
Department or agency: Department of Veterans Affairs;
97;
Program or activity: Pension.
38;
Department or agency: Department of Veterans Affairs;
98;
Program or activity: Vocational Rehabilitation.
Sources: GAO's analysis of cited agencies' fiscal year 2006 performance
and accountability reports and annual reports.
[A] Agency PAR or annual report was not available as of the end of
fieldwork.
[End of table]
[End of section]
Appendix II: Improper Payment Estimates Reported in Agency Fiscal Year
2005 and 2006 Performance and Accountability Reports or Annual Reports:
(Continued From Previous Page)
1;
Department or agency: Agency for International Development;
1; Program or activity: Cash Transfers;
2005 Total estimate: (dollars in millions): 0.9[A];
2005 Error rate: (percent): 0.1[A];
2006 Total estimate: (dollars in millions): 7.0;
2006 Error rate: (percent): 0.8.
2;
Program or activity: Cooperative Agreements, Grants, and Contracts;
2005 Total estimate: (dollars in millions): 0.2[A];
2005 Error rate: (percent): 0.0[A, B];
2006 Total estimate: (dollars in millions): 15.1;
2006 Error rate: (percent): 0.2.
2;
Department or agency: Department of Agriculture;
3;
Program or activity: Child and Adult Care Food Program;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 16.0;
2006 Error rate: (percent): 1.8.
4;
Program or activity: Conservation Reserve Program;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 64.0;
2006 Error rate: (percent): 3.5.
5;
Program or activity: Direct and Counter-Cyclical Payments;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 424.0;
2006 Error rate: (percent): 5.0.
6;
Program or activity: Disaster Programs;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 291.0;
2006 Error rate: (percent): 12.3.
7;
Program or activity: Farm Security and Rural Investment;
2005 Total estimate: (dollars in millions): 16.0;
2005 Error rate: (percent): 1.6;
2006 Total estimate: (dollars in millions): 3.0;
2006 Error rate: (percent): 0.2.
8;
Program or activity: Federal Crop Insurance Corporation;
2005 Total estimate: (dollars in millions): 28.0;
2005 Error rate: (percent): 0.9;
2006 Total estimate: (dollars in millions): 62.0;
2006 Error rate: (percent): 1.9.
9;
Program or activity: Food Stamp Program;
2005 Total estimate: (dollars in millions): 1,432.0;
2005 Error rate: (percent): 5.9;
2006 Total estimate: (dollars in millions): 1,645.0;
2006 Error rate: (percent): 5.8.
10;
Program or activity: Loan Deficiency Payments;
2005 Total estimate: (dollars in millions): 5.0;
2005 Error rate: (percent): 1.0;
2006 Total estimate: (dollars in millions): 443.0;
2006 Error rate: (percent): 9.3.
11;
Program or activity: Marketing Assistance Loan Program (previously
Commodity Loan Programs);
2005 Total estimate: (dollars in millions): 45.0;
2005 Error rate: (percent): 0.7;
2006 Total estimate: (dollars in millions): 1,611.0;
2006 Error rate: (percent): 20.3.
12;
Program or activity: Milk Income Loss Contract Program;
2005 Total estimate: (dollars in millions): 0.2;
2005 Error rate: (percent): 0.1;
2006 Total estimate: (dollars in millions): 0.0[C];
2006 Error rate: (percent): 0.0[C].
13;
Program or activity: National School Lunch and School Breakfast
Programs (previously School Programs)[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
14;
Program or activity: Noninsured Assistance Program;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 25.0;
2006 Error rate: (percent): 22.9.
15;
Program or activity: Rental Assistance Program;
2005 Total estimate: (dollars in millions): 27.0;
2005 Error rate: (percent): 3.2;
2006 Total estimate: (dollars in millions): 22.0;
2006 Error rate: (percent): 3.5.
16;
Program or activity: Wildland Fire Suppression Management;
2005 Total estimate: (dollars in millions): 18.0[A];
2005 Error rate: (percent): 3.7[A];
2006 Total estimate: (dollars in millions): 7.0;
2006 Error rate: (percent): 2.5.
17;
Program or activity: Women, Infants, and Children;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 21.0;
2006 Error rate: (percent): 0.6.
3;
Department or agency: Department of Commerce;
18;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
4;
Department or agency: Department of Defense;
19;
Program or activity: Civilian Pay;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 62.8;
2006 Error rate: (percent): 0.1.
20;
Program or activity: Commercial Pay;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 550.0;
2006 Error rate: (percent): 0.2.
21;
Program or activity: Military Health Benefits;
2005 Total estimate: (dollars in millions): 87.8[A];
2005 Error rate: (percent): 1.2[A];
2006 Total estimate: (dollars in millions): 140.0;
2006 Error rate: (percent): 2.0.
22;
Program or activity: Military Pay;
2005 Total estimate: (dollars in millions): 432.0;
2005 Error rate: (percent): 0.6;
2006 Total estimate: (dollars in millions): 65.9;
2006 Error rate: (percent): 0.1.
23;
Program or activity: Military Retirement Fund;
2005 Total estimate: (dollars in millions): 49.3;
2005 Error rate: (percent): 0.1;
2006 Total estimate: (dollars in millions): 48.8;
2006 Error rate: (percent): 0.1.
24;
Program or activity: Travel Pay;
2005 Total estimate: (dollars in millions): 0.0[C];
2005 Error rate: (percent): 0.0[C];
2006 Total estimate: (dollars in millions): 8.0;
2006 Error rate: (percent): 1.0.
5;
Department or agency: Department of Education;
25;
Program or activity: Student Financial Assistance--Federal Family
Education Loan;
2005 Total estimate: (dollars in millions): 190.0[A];
2005 Error rate: (percent): 2.2[A];
2006 Total estimate: (dollars in millions): 401.0;
2006 Error rate: (percent): 2.2.
26;
Program or activity: Student Financial Assistance--Pell Grants;
2005 Total estimate: (dollars in millions): 444.0[A];
2005 Error rate: (percent): 3.5[A];
2006 Total estimate: (dollars in millions): 422.0;
2006 Error rate: (percent): 3.5.
27;
Program or activity: Title I;
2005 Total estimate: (dollars in millions): 149.0;
2005 Error rate: (percent): 1.2;
2006 Total estimate: (dollars in millions): 25.2;
2006 Error rate: (percent): 0.2.
6;
Department or agency: Department of Energy;
28;
Program or activity: Payment programs;
2005 Total estimate: (dollars in millions): 14.5;
2005 Error rate: (percent): 0.1;
2006 Total estimate: (dollars in millions): 18.4;
2006 Error rate: (percent): 0.1.
7;
Department or agency: Environmental Protection Agency;
29;
Program or activity: Clean Water State Revolving Funds;
2005 Total estimate: (dollars in millions): 3.0[A];
2005 Error rate: (percent): 0.1[A];
2006 Total estimate: (dollars in millions): 3.5;
2006 Error rate: (percent): 0.2.
30;
Program or activity: Drinking Water State Revolving Funds;
2005 Total estimate: (dollars in millions): 0.0[F];
2005 Error rate: (percent): 0.0[F];
2006 Total estimate: (dollars in millions): 0.0[F];
2006 Error rate: (percent): 0.0[F].
8;
Department or agency: Export-Import Bank of the United States[G];
31;
Program or activity: All programs and activities ;
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
9;
Department or agency: Farm Credit System Insurance Corporation;
32;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[G];
2005 Error rate: (percent): 0.0[G];
2006 Total estimate: (dollars in millions): 0.0[H];
2006 Error rate: (percent): 0.0[H].
10;
Department or agency: Federal Communications Commission;
33;
Program or activity: High Cost Support Program[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0;
34;
Program or activity: Universal Service Fund's Schools and Libraries[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
11;
Department or agency: Federal Deposit Insurance Corporation[G];
35;
Program or activity: All programs and activities ;
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
12;
Department or agency: Federal Trade Commission;
36;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[I];
2005 Error rate: (percent): 0.0[I];
2006 Total estimate: (dollars in millions): 0.0[E];
2006 Error rate: (percent): 0.0[E].
13;
Department or agency: General Services Administration;
37;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
14;
Department or agency: Department of Health and Human Services;
38;
Program or activity: Child Care and Development Fund[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
39;
Program or activity: Foster Care--Title IV-E;
2005 Total estimate: (dollars in millions): 152.0[A];
2005 Error rate: (percent): 8.6[A];
2006 Total estimate: (dollars in millions): 134.0;
2006 Error rate: (percent): 7.7.
40;
Program or activity: Head Start;
2005 Total estimate: (dollars in millions): 109.0[A];
2005 Error rate: (percent): 1.6;
2006 Total estimate: (dollars in millions): 210.0;
2006 Error rate: (percent): 3.1.
41;
Program or activity: Medicaid[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
42;
Program or activity: Medicare Advantage[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
43;
Program or activity: Medicare Fee-for-Service;
2005 Total estimate: (dollars in millions): 12,100.0;
2005 Error rate: (percent): 5.2;
2006 Total estimate: (dollars in millions): 10,800.0;
2006 Error rate: (percent): 4.4.
44;
Program or activity: Medicare Prescription Drug Benefit[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
45;
Program or activity: State Children's Insurance Program[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
46;
Program or activity: Temporary Assistance for Needy Families[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
15;
Department or agency: Department of Homeland Security;
47;
Program or activity: Individuals and Households Program;
2005 Total estimate: (dollars in millions): 397.0[A];
2005 Error rate: (percent): 8.6[A];
2006 Total estimate: (dollars in millions): 334.0;
2006 Error rate: (percent): 8.6.
48;
Program or activity: Vendor payments;
2005 Total estimate: (dollars in millions): 494.0[A];
2005 Error rate: (percent): 7.4[A];
2006 Total estimate: (dollars in millions): 502.0;
2006 Error rate: (percent): 7.4.
16;
Department or agency: Department of Housing and Urban Development;
49;
Program or activity: Community Development Block Grant (Entitlement
Grants, States/Small Cities);
2005 Total estimate: (dollars in millions): 8.0[A];
2005 Error rate: (percent): 0.2[A];
2006 Total estimate: (dollars in millions): 4.4;
2006 Error rate: (percent): 0.1[ ].
50;
Program or activity: Federal Housing Administration's Single Family
Acquired Asset Management System ;
2005 Total estimate: (dollars in millions): 2.2;
2005 Error rate: (percent): 0.6;
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
51;
Program or activity: Low Income Public Housing;
2005 Total estimate: (dollars in millions): 326.0;
2005 Error rate: (percent): 5.6;
2006 Total estimate: (dollars in millions): 378.5;
2006 Error rate: (percent): 1.4.
52;
Program or activity: Public Housing Capital Fund;
2005 Total estimate: (dollars in millions): 133.5;
2005 Error rate: (percent): 5.1;
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
53;
Program or activity: Section 8--Project Based;
2005 Total estimate: (dollars in millions): 324.0;
2005 Error rate: (percent): 0.0[F];
2006 Total estimate: (dollars in millions): 362.6;
2006 Error rate: (percent): 1.3.
54;
Program or activity: Section 8-- Tenant Based;
2005 Total estimate: (dollars in millions): 551.0;
2005 Error rate: (percent): 0.0[F];
2006 Total estimate: (dollars in millions): 723.2;
2006 Error rate: (percent): 2.7.
17;
Department or agency: Department of the Interior;
55;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
18;
Department or agency: Department of Justice;
56;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
19;
Department or agency: Department of Labor;
57;
Program or activity: Federal Employees' Compensation Act ;
2005 Total estimate: (dollars in millions): 3.3;
2005 Error rate: (percent): 0.1;
2006 Total estimate: (dollars in millions): 0.3;
2006 Error rate: (percent): 0.0[B].
58;
Program or activity: Unemployment Insurance;
2005 Total estimate: (dollars in millions): 3,267.0;
2005 Error rate: (percent): 10.1;
2006 Total estimate: (dollars in millions): 3,376.0;
2006 Error rate: (percent): 10.7.
59;
Program or activity: Workforce Investment Act;
2005 Total estimate: (dollars in millions): 7.8[A];
2005 Error rate: (percent): 0.2;
2006 Total estimate: (dollars in millions): 6.4;
2006 Error rate: (percent): 0.2.
20;
Department or agency: National Aeronautics and Space Administration;
60;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
21;
Department or agency: National Archives and Records Administration;
61;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[I];
2005 Error rate: (percent): 0.0[I];
2006 Total estimate: (dollars in millions): 0.0[E];
2006 Error rate: (percent): 0.0[E].
22;
Department or agency: National Credit Union Administration;
62;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[G ];
2005 Error rate: (percent): 0.0[G];
2006 Total estimate: (dollars in millions): 0.0[H];
2006 Error rate: (percent): 0.0[H].
23;
Department or agency: National Science Foundation;
63;
Program or activity: Research and Education Grants and Cooperative
Agreements;
2005 Total estimate: (dollars in millions): 1.1;
2005 Error rate: (percent): 0.0[B];
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
24;
Department or agency: National Transportation Safety Board;
64;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[I];
2005 Error rate: (percent): 0.0[I];
2006 Total estimate: (dollars in millions): 0.0[G];
2006 Error rate: (percent): 0.0[G].
25;
Department or agency: Nuclear Regulatory Commission;
65;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
26;
Department or agency: Office of Personnel Management;
66;
Program or activity: Federal Employees Group Life Insurance;
2005 Total estimate: (dollars in millions): 3.4[A];
2005 Error rate: (percent): 0.3[A];
2006 Total estimate: (dollars in millions): 0.8;
2006 Error rate: (percent): 0.1.
67;
Program or activity: Federal Employees Health Benefits Program;
2005 Total estimate: (dollars in millions): 196.7[A];
2005 Error rate: (percent): 0.7[A ];
2006 Total estimate: (dollars in millions): 62.5;
2006 Error rate: (percent): 0.2.
68;
Program or activity: Retirement Program (Civil Service Retirement
System and Federal Employees Retirement System);
2005 Total estimate: (dollars in millions): 153.0[A];
2005 Error rate: (percent): 0.3[A];
2006 Total estimate: (dollars in millions): 253.5;
2006 Error rate: (percent): 0.4.
27;
Department or agency: Pension Benefit Guaranty Corporation;
69;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0[G];
2005 Error rate: (percent): 0.0[G];
2006 Total estimate: (dollars in millions): 0.0[E];
2006 Error rate: (percent): 0.0[E].
28;
Department or agency: U.S. Postal Service[G];
70;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
29;
Department or agency: Railroad Retirement Board;
71;
Program or activity: Railroad Unemployment Insurance Benefits;
2005 Total estimate: (dollars in millions): 2.6[A];
2005 Error rate: (percent): 2.3[A];
2006 Total estimate: (dollars in millions): 2.7;
2006 Error rate: (percent): 2.3.
72;
Program or activity: Retirement and Survivors Benefits;
2005 Total estimate: (dollars in millions): 151.8[A];
2005 Error rate: (percent): 1.7[A];
2006 Total estimate: (dollars in millions): 157.0;
2006 Error rate: (percent): 1.7.
30;
Department or agency: Securities and Exchange Commission;
73;
Program or activity: All programs and activities[E];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
31;
Department or agency: Small Business Administration;
74;
Program or activity: 504 Certified Development Companies[D];
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
75;
Program or activity: 7(a) Business Loan Program;
2005 Total estimate: (dollars in millions): 8.7[A];
2005 Error rate: (percent): 1.4[A];
2006 Total estimate: (dollars in millions): 10.2;
2006 Error rate: (percent): 1.6.
76;
Program or activity: Disaster Assistance;
2005 Total estimate: (dollars in millions): 1.6;
2005 Error rate: (percent): 0.1;
2006 Total estimate: (dollars in millions): 89.4;
2006 Error rate: (percent): 0.8.
77;
Program or activity: Small Business Investment Companies;
2005 Total estimate: (dollars in millions): 125.0[A];
2005 Error rate: (percent): 4.7[A];
2006 Total estimate: (dollars in millions): 0.0[C];
2006 Error rate: (percent): 0.0[C].
32;
Department or agency: Smithsonian Institution[G];
78;
Program or activity: All programs and activities;
2005 Total estimate: (dollars in millions): 0.0;
2005 Error rate: (percent): 0.0;
2006 Total estimate: (dollars in millions): 0.0;
2006 Error rate: (percent): 0.0.
33;
Department or agency: Social Security Administration;
79;
Program or activity: Old Age and Survivors' Insurance;
2005 Total estimate: (dollars in millions): 3,681.0;
2005 Error rate: (percent): 0.7;
2006 Total estimate: (dollars in millions): 3,280.0;
2006 Error rate: (percent): 0.6.
80;
Program or activity: Disability Insurance;
2005 Total estimate: (dollars in millions): 0.0[F];
2005 Error rate: (percent): 0.0[F];
2006 Total estimate: (dollars in millions): 0.0[F];
2006 Error rate: (percent): 0.0[F].
81;
Program or activity: Supplemental Security Income Program;
2005 Total estimate: (dollars in millions): 2,910.0;
2005 Error rate: (percent): 7.7;
2006 Total estimate: (dollars in millions): 3,028.0;
2006 Error rate: (percent): 7.8.
34;
Department or agency: Department of State;
82;
Program or activity: International Information Program--U.S. Speaker
and Specialist Program;
2005 Total estimate: (dollars in millions): 1.9;
2005 Error rate: (percent): 81.2;
2006 Total estimate: (dollars in millions): 6.7[K];
2006 Error rate: (percent): 23.8.
83;
Program or activity: International Narcotic and Law Enforcement
Affairs--Narcotics Program;
2005 Total estimate: (dollars in millions): 0.6;
2005 Error rate: (percent): 0.0[B];
2006 Total estimate: (dollars in millions): 12.4[K];
2006 Error rate: (percent): 4.0.
84;
Program or activity: Structures and Equipment;
2005 Total estimate: (dollars in millions): 0.2;
2005 Error rate: (percent): 0.0[B];
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
85;
Program or activity: Vendor payments;
2005 Total estimate: (dollars in millions): 0.4;
2005 Error rate: (percent): 0.0[B];
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
35;
Department or agency: Tennessee Valley Authority;
86;
Program or activity: Payment programs;
2005 Total estimate: (dollars in millions): 36.3;
2005 Error rate: (percent): 0.5;
2006 Total estimate: (dollars in millions): 7.5;
2006 Error rate: (percent): 0.1.
36;
Department or agency: Department of Transportation;
87;
Program or activity: Airport Improvement Program;
2005 Total estimate: (dollars in millions): 0.0[L];
2005 Error rate: (percent): 0.0[L];
2006 Total estimate: (dollars in millions): 0.0[D];
2006 Error rate: (percent): 0.0[D].
88;
Program or activity: Federal Transit--Capital Investment Grants;
2005 Total estimate: (dollars in millions): 0.0[L];
2005 Error rate: (percent): 0.0[L];
2006 Total estimate: (dollars in millions): 0.0[D];
2006 Error rate: (percent): 0.0[D].
89;
Program or activity: Federal Transit--Formula Grants;
2005 Total estimate: (dollars in millions): 0.0[L];
2005 Error rate: (percent): 0.0[L];
2006 Total estimate: (dollars in millions): 0.0[D];
2006 Error rate: (percent): 0.0[D].
90;
Program or activity: Highway Planning and Construction;
2005 Total estimate: (dollars in millions): 0.0[L];
2005 Error rate: (percent): 0.0[L];
2006 Total estimate: (dollars in millions): 30.2;
2006 Error rate: (percent): 0.2.
37;
Department or agency: Department of the Treasury;
91;
Program or activity: Earned Income Tax Credit;
2005 Total estimate: (dollars in millions): 10,500.0;
2005 Error rate: (percent): 25.5;
2006 Total estimate: (dollars in millions): 10,700.0;
2006 Error rate: (percent): 25.5.
38;
Department or agency: Department of Veterans Affairs;
92;
Program or activity: Compensation;
2005 Total estimate: (dollars in millions): 306.0[A];
2005 Error rate: (percent): 1.1;
2006 Total estimate: (dollars in millions): 324.6;
2006 Error rate: (percent): 1.0.
93;
Program or activity: Dependency and Indemnity Compensation;
2005 Total estimate: (dollars in millions): 0.0[F];
2005 Error rate: (percent): 0.0[F];
2006 Total estimate: (dollars in millions): 0.0[F];
2006 Error rate: (percent): 0.0[F].
94;
Program or activity: Education programs;
2005 Total estimate: (dollars in millions): 32.3[A];
2005 Error rate: (percent): 1.2[A];
2006 Total estimate: (dollars in millions): 67.2;
2006 Error rate: (percent): 2.2.
95;
Program or activity: Insurance programs;
2005 Total estimate: (dollars in millions): 0.3;
2005 Error rate: (percent): 0.0[B];
2006 Total estimate: (dollars in millions): 0.0[J];
2006 Error rate: (percent): 0.0[J].
96;
Program or activity: Loan Guaranty;
2005 Total estimate: (dollars in millions): 3.5[A];
2005 Error rate: (percent): 0.3[A];
2006 Total estimate: (dollars in millions): 0.9;
2006 Error rate: (percent): 0.1.
97;
Program or activity: Pension;
2005 Total estimate: (dollars in millions): 370.9[A];
2005 Error rate: (percent): 10.9[A];
2006 Total estimate: (dollars in millions): 370.6;
2006 Error rate: (percent): 10.7.
98;
Program or activity: Vocational Rehabilitation;
2005 Total estimate: (dollars in millions): 6.2[A];
2005 Error rate: (percent): 1.1[A];
2006 Total estimate: (dollars in millions): 6.0;
2006 Error rate: (percent): 1.0.
Total;
2005 Total estimate (dollars in millions): $39,310.2;
2005 Error rate (percent): [Empty];
2006 Total estimate (dollars in millions): $41,643.3;
2006 Error rate (percent): [Empty].
Sources: GAO prior report and analysis of cited agencies' fiscal year
2006 PARs or annual reports.
[A] Fiscal year 2005 estimates or error rates were updated to the
revised estimates reported in the fiscal year 2006 PARs or annual
reports.
[B] Agency reported error rate was less than one percent or reported
the error rate rounded to zero for purposes of this testimony.
[C] Agency did not report an annual improper payment estimate or error
rate.
[D] See table 3 of this testimony.
[E] Agency reported that it had no programs or activities susceptible
to significant improper payments.
[F] Agency combined with the program above.
[G] Agency did not address improper payments or IPIA in its PAR or
annual report for fiscal year 2005, fiscal year 2006, or both.
[H] Agency PAR or annual report was not available as of the end of
fieldwork.
[I] Fiscal year 2006 was the first year this agency was included in our
scope of review.
[J] Agency reported program no longer susceptible to significant
improper payments.
[K] We obtained this amount from OMB.
[L] Agency reported that the annual improper payment amount or error
rate was zero.
[End of table]
FOOTNOTES
[1] Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002).
[2] Section 831 of the National Defense Authorization Act for Fiscal
Year 2002, Pub. L. No. 107-107, div. A, title VIII, § 831, 115 Stat.
1012, 1186 (Dec. 28, 2001) (codified at 31 U.S.C. §§ 3561-3567).
[3] IPIA defines improper payments as 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. It includes
any payment to an ineligible recipient, any payment for an ineligible
service, any duplicate payment, payments for services not received, and
any payment that does not account for credit for applicable discounts.
[4] OMB Memorandum M-06-23, "Issuance of Appendix C to OMB Circular No.
A-123" (Aug. 10, 2006).
[5] OMB's guidance defines significant improper payments as those in
any particular program that exceed both 2.5 percent of program payments
and $10 million annually.
[6] Office of Management and Budget, Improving the Accuracy and
Integrity of Federal Payments, (Washington, D.C.: Jan. 31, 2007).
[7] GAO, Improper Payments: Agencies' Fiscal Year 2005 Reporting under
the Improper Payments Information Act Remains Incomplete, GAO-07-92
(Washington, D.C.: Nov. 14, 2006) and Financial Management: Challenges
in Meeting Requirements of the Improper Payments Information Act, GAO-
05-417 (Washington, D.C.: Mar. 31, 2005).
[8] GAO-07-92 and GAO-05-417.
[9] GAO-05-417.
[10] GAO-07-92.
[11] Department of Agriculture, Office of Inspector General, Memorandum
for the Secretary, "Management Challenges," September 2, 2005.
[12] Prior to the governmentwide IPIA reporting requirements beginning
with fiscal year 2004, former section 57 of OMB Circular No. A-11
required certain agencies to submit similar information, including
estimated improper payment target rates, target rates for future
reductions in these payments, the types and causes of these payments,
and variances from targets and goals established. In addition, these
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.
[13] The net increase represents newly reported programs for applicable
years as well as programs that may have reported in one year but not in
a subsequent fiscal year.
[14] For fiscal year 2006, OMB reported total improper payments of
about $41 billion, a difference of $1 billion. The difference is
primarily attributable to OMB excluding improper payment estimates for
the Tennessee Valley Authority and agency-reported improper payment
estimates related to commercial or vendor payments because, according
to OMB, those estimates are reported in agencies' recovery auditing
amounts. Rounding differences also exist.
[15] GAO, Improper Payments: Incomplete Reporting under the Improper
Payments Information Act Masks the Extent of the Problem, GAO-07-254T
(Washington, D.C.: Dec. 5, 2006).
[16] GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.:
January 2007).
[17] GAO-05-417 and GAO-07-92, respectively.
[18] The four agencies include HHS, DHS, DOJ, and NASA.
[19] GAO, Improper Payments: Federal and State Coordination Needed to
Report National Improper Payment Estimates on Federal Programs, GAO-06-
347 (Washington, D.C. Apr. 14, 2006).
[20] 31 U.S.C. §§ 7501-7507. Under the Single Audit Act, as amended,
and implementing guidance, independent auditors audit state and local
governments and nonprofit organizations that expend $500,000 or more in
federal awards to assess, among other things, compliance with laws,
regulations, and the provisions of contracts or grant agreements
material to the entities' major federal programs.
[21] Pub. L. No. 105-220, 112 Stat. 936 (Aug. 7, 1998).
[22] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[23] GAO, Strategies to Manage Improper Payments: Learning From Public
and Private Sector Organizations, GAO-02-69G (Washington, D.C.: October
2001).
[24] A processing year is the calendar year in which tax returns and
related data are processed.
[25] During processing year 2006, IRS processed primarily 2005 tax
returns.
[26] GAO, Financial Audit: IRS's Fiscal Years 2006 and 2005 Financial
Statements, GAO-07-136 (Washington, D.C.: Nov. 9, 2006).
[27] GAO-07-92.
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