Summary
Fiscal year 2005 marked the second year that executive agencies were required to report improper payment information under the Improper Payments Information Act of 2002 (IPIA). As a steward of taxpayer dollars, the federal government is accountable for how its agencies and grantees spend billions of taxpayer dollars and is responsible for safeguarding those funds against improper payments. GAO was asked to determine the progress agencies have made in their improper payment reporting and the total amount of improper payments recouped through recovery auditing. To accomplish this, GAO reviewed improper payment information reported by 35 agencies in their fiscal year 2005 performance and accountability or annual reports.
While making progress, agencies' fiscal year 2005 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. GAO found that these challenges continue to hinder full reporting of improper payment information because of the following three factors: (1) Existing reporting incomplete. Although 18 agencies collectively identified and estimated improper payments for 57 programs and activities totaling $38 billion, some agencies still had not instituted systematic methods of reviewing all programs, resulting in their identification of none or only a few programs as susceptible to significant improper payments. In many cases, these same agencies had well-known and documented financial management weaknesses as well as fraudulent, improper, and questionable payments. Further, improper payment estimates totaling about $389 million for 9 programs were not based on a valid statistical sampling methodology as required. Higher estimates would have been expected had the correct methods been used, given that total outlays for these 9 programs exceeded $58.2 billion. (2) Large programs still not included. Improper payment estimates for 10 risk-susceptible programs with outlays totaling over $234 billion still have not been provided. Most of these programs were subject to Office of Management and Budget (OMB) reporting requirements that preceded IPIA. (3) Threshold criteria limit reporting. The act includes broad criteria to identify risk-susceptible programs. OMB's implementing guidance includes more specific criteria that limit the disclosure and transparency of agencies' improper payments. With regard to agencies' recovery audit efforts, GAO found that the data reported may present an overly optimistic view of these efforts. While 21 agencies were required to report on their recovery audit efforts, GAO identified discrepancies in several agencies' information and found limited reviews over contract payments. For example, for fiscal year 2005, the National Aeronautics and Space Administration (NASA) reported that it had identified and recovered $617,442 in contract payments, a 100 percent recovery rate. Yet, the NASA Office of Inspector General reported it had identified over $515 million in questioned contract costs during fiscal year 2005, of which NASA management decided to pursue recovery of $51 million. Had this amount been compared to the $617,442 NASA actually recovered, its recovery rate would drop from the reported 100 percent to 1.2 percent. In addition, we noted that 5 of the 21 agencies did not review all of their agency components as part of their recovery audit efforts while 2 agencies reported that recovery auditing was not cost beneficial without reporting any details to support this determination.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
McCoy Williams
Government Accountability Office: Financial Management and Assurance
(202) 516-6906
Recommendations for Executive Action
Recommendation: To help ensure the complete disclosure and transparency of governmentwide improper payments, the Congress may wish to consider amending existing IPIA provisions to define specific criteria, such as a dollar threshold, agencies should use to identify which programs and activities are susceptible to significant improper payments.
Agency Affected: Congress
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help further the progress toward meeting the goals of IPIA and ensuring the integrity of payments, the Director, Office of Management and Budget, should expand OMB's IPIA implementing guidance to describe in greater detail factors that agencies should consider when conducting their annual risk assessments, such as program complexity, operational changes, findings from investigative reports, and financial statement and performance audit reports.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help further the progress toward meeting the goals of IPIA and ensuring the integrity of payments, the Director, Office of Management and Budget, should expand OMB's IPIA implementing guidance to describe in greater detail factors agencies should use when reporting improper payments in their performance and accountability reports (PARs), such as (1) provide a baseline of what agencies should include when reporting on causes, corrective actions, and manager accountability and (2) require that applicable agencies cite the specific law or regulation in their PARs when describing statutory barriers that may limit the agencies' corrective actions for reducing improper payments.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help further the progress toward meeting the goals of IPIA and ensuring the integrity of payments, the Director, Office of Management and Budget, should enforce existing guidance requiring agencies to use a statistically valid sampling methodology to calculate improper payment estimates.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help further the progress toward meeting the goals of IPIA and ensuring the integrity of payments, the Director, Office of Management and Budget, should gather from agencies the dollar amount of payments that agencies make under statute or judicial determinations that later are determined to be overpayments in order for OMB to assess and determine the magnitude of the issue and whether additional reporting is warranted.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help further the progress toward meeting the goals of IPIA and ensuring the integrity of payments, the Director, Office of Management and Budget, should modify existing guidance to require those agencies stating that recovery auditing over contract payments is not cost beneficial to include their rationale for this determination.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
