<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:41851.wais]
THE IMPROPER PAYMENTS INFORMATION ACT--ARE AGENCIES MEETING THE
REQUIREMENTS OF THE LAW?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
FINANCE, AND ACCOUNTABILITY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 5, 2006
__________
Serial No. 109-252
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
----------
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Government Management, Finance, and Accountability
TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee
Ex Officio
HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Tabetha Mueller, Professional Staff Member
Erin Phillips, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
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Page
Hearing held on April 5, 2006.................................... 1
Statement of:
Combs, Linda M., Controller, Office of Federal Financial
Management, Office of Management and Budget; Charles
Johnson, Assistant Secretary for Budget, Technology, and
Finance, U.S. Department of Health and Human Services,
accompanied by Timothy B. Hill, Chief Financial Officer and
Director, Office of Financial Management, Centers for
Medicare and Medicaid Services; and McCoy Williams,
Director, Financial Management and Assurance, U.S.
Government Accountability Office........................... 7
Combs, Linda M........................................... 7
Johnson, Charles......................................... 14
Williams, McCoy.......................................... 34
Letters, statements, etc., submitted for the record by:
Combs, Linda M., Controller, Office of Federal Financial
Management, Office of Management and Budget, prepared
statement of............................................... 9
Johnson, Charles, Assistant Secretary for Budget, Technology,
and Finance, U.S. Department of Health and Human Services,
prepared statement of...................................... 16
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 3
Towns, Hon. Edolphus, a Representative in Congress from the
State of New York, prepared statement of................... 5
Williams, McCoy, Director, Financial Management and
Assurance, U.S. Government Accountability Office, prepared
statement of............................................... 36
THE IMPROPER PAYMENTS INFORMATION ACT--ARE AGENCIES MEETING THE
REQUIREMENTS OF THE LAW?
----------
WEDNESDAY, APRIL 5, 2006
House of Representatives,
Subcommittee on Government Management, Finance, and
Accountability,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:04 p.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts, Duncan, and Maloney.
Staff present: Mike Hettinger, staff director; Dan Daly,
counsel; Tabetha Mueller, professional staff member; Erin
Phillips, clerk; Adam Bordes, minority professional staff
member; and Jean Gosa, minority assistant clerk.
Mr. Platts. A quorum being present, this hearing of the
Government Reform Subcommittee on Government Management,
Finance, and Accountability will come to order.
Congress has a responsibility to ensure that tax dollars
are spent in the most effective manner possible and for their
intended purpose. Unfortunately, as we will hear today,
billions of dollars continue to be lost due to improper
payments--any payment that should not have been made.
This administration and Congress have made the reduction of
improper payments a top priority. In support of this goal, this
subcommittee believes that taxpayers have a fundamental right
to know how their tax dollars are being spent. In 2002, my
esteemed former colleague, Congressman Steve Horn, who served
as chairman of this subcommittee, was successful in securing
the enactment of the Improper Payments Information Act of 2002.
This law has helped bring to the forefront the need to address
this issue more aggressively.
The work of the past few years has brought us a long way to
getting our arms around the extent of this problem. What we
know today is that a primary cause of these mistakes, which
occur throughout Government, is the lack of adequate internal
financial controls and business process systems. Some agencies
have employed new technologies, such as data mining and
electronic benefits transfer, with great success in helping to
reduce their error rates. More can and must be done. This
subcommittee will continue to conduct aggressive oversight on
this important topic.
Today we will have from the Honorable Dr. Linda Combs,
Controller in the Office of Federal Financial Management at the
Office of Management and Budget. Dr. Combs, we again thank you
for being with us. As in the past, we certainly appreciate your
knowledge and wisdom that you bring to the committee.
Ms. Combs. Thank you, Mr. Chairman.
Mr. Platts. We will also be joined by Mr. Charles Johnson
of the Department of Health and Human Services, who is
accompanied by Mr. Tim Hill, Chief Financial Officer at the
Center for Medicare and Medicaid Services. We appreciate both
of you being with us as well and look forward to your
testimony. And we are joined finally by McCoy Williams, a
regular here at the subcommittee. Mr. Williams, we appreciate
you being with us and, again, the expertise and knowledge you
bring to the subcommittee.
Mr. Williams. Thank you, Mr. Chairman.
[The prepared statement of Hon. Todd Russell Platts
follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. We will proceed with opening statements and
then get into your statements, and we appreciate the written
testimonies you have provided, and if you want to summarize
that here today, then we will get into questions and answers.
The gentleman from Tennessee, did you have a statement you
would like to begin with?
Mr. Duncan. Yes, Mr. Chairman. Thank you very much. Very
briefly, I will just say that, you know, the work of this
Subcommittee on Government Management, Finance, and
Accountability, I guess it is not the most dramatic or colorful
or high-profile, but it is certainly extremely important,
particularly, as we all know, when we have a national debt of
well over $8 trillion and now we have raised the debt limit to
$9 trillion because we know we are headed very quickly to that
level.
So I think this work is very, very important, and I
appreciate the seriousness and diligence with which you do your
duties, Mr. Chairman, and I specifically remember the hearing
that you had on this same legislation a year or so ago. And, in
fact, we all represent about 700,000 people, but I send out a
newsletter a couple of times a year to the 285,000-odd
addresses in my district. And I wrote about this hearing as one
of the topics, one of the many topics that I covered in that
newsletter.
We heard some pretty amazing, pretty startling information
in the hearing last year, and I am pleased that you have called
another hearing, and I look forward to hearing the testimony to
see what progress has been made since that point.
Thank you very much.
Mr. Platts. Thank you, Mr. Duncan, and we always appreciate
and welcome your participation and your great leadership on
financial accountability as well.
Mr. Duncan. Thank you.
[The prepared statement of Hon. Edolphus Towns follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. We will proceed to our witnesses. The practice
of the committee, if we could swear each of you in before your
testimonies and any others that will be advising you as part of
your testimonies here today. If you would like to rise and
raise your right hands?
[Witnesses sworn.]
Mr. Platts. Thank you. You may be seated. The clerk will
note that all the witnesses have affirmed the oath, and, Dr.
Combs, we will begin with you, if you would like to proceed.
STATEMENTS OF LINDA M. COMBS, CONTROLLER, OFFICE OF FEDERAL
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; CHARLES
JOHNSON, ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY, AND
FINANCE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES,
ACCOMPANIED BY TIMOTHY B. HILL, CHIEF FINANCIAL OFFICER AND
DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, CENTERS FOR MEDICARE
AND MEDICAID SERVICES; AND McCOY WILLIAMS, DIRECTOR, FINANCIAL
MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF LINDA M. COMBS
Ms. Combs. Thank you, Chairman Platts, Congressman Towns,
and members of this committee. I am certainly pleased to be
here today to discuss the administration's efforts to improve
the accuracy and integrity of Federal payments. As a reflection
of how important the effective and efficient stewardship of
taxpayer dollars is, the President has made the elimination of
improper payments one of his highest management priorities. I
appreciate the opportunity we have today to share some recent
success stories on agency efforts, to discuss steps we are
taking to address ongoing challenges, and to provide you with
the highlights from OMB's second annual report on
governmentwide improper payments.
During fiscal year 2005, the Federal Government made
substantial progress in meeting the President's goal to
eliminate improper payments. Most significantly, the
governmentwide improper payment total reported for fiscal year
2004 decreased from $45.1 billion to $37.3 billion, a reduction
of approximately $7.8 billion, or 17 percent.
Notable accomplishments from this past year include:
Medicare's reported improper payments decreased by more than $9
billion, or 44 percent.
The U.S. Department of Agriculture reported an error rate
of less than 6 percent in the food stamp program, which is the
lowest error rate in the program's history.
The Department of Labor reduced improper Unemployment
Insurance payments by approximately $600 million in fiscal year
2005. This represents a greater than 15-percent decrease in the
level of improper payments for this particular program since
last year's reporting.
The Department of Housing and Urban Development has reduced
improper payments in this program by more than $1.8 billion
since 2000.
Although several important programs such as the Earned
Income Tax Credit and Old-Age and Survivors Disability
Insurance reported increases in 2005, the governmentwide
improper payment total is continuing to trend significantly
downward.
Our CFOs are working together with program officials to
leverage new technologies and generate more cost-efficient
methods for measuring and eliminating improper payments.
Another critical accomplishment in fiscal year 2005 was
that Federal agencies reported error measurements on an
additional 17 programs.
We have an error measurement in place for approximately 85
percent of all payments deemed risk susceptible by Federal
agencies. Although we are proud of this result, we are not
satisfied with it.
Also of note, and in direct response to suggestions made by
this subcommittee at a previous hearing, agency reporting on
improper payments to vendors is now included in our
governmentwide reporting, providing a more complete picture on
governmentwide improper payments.
Specifically, Federal agencies reviewed $365 billion in
vendor payments in fiscal year 2005. They identified $557
million in improper payments, of which $467 million, or 84
percent, has been recovered to date.
Because 95 percent of the reported improper payment total
continues to reside within seven programs, the first seven that
we identified in 2004, OMB continues to focus on these
particular agencies.
Finally, the administration continues to pursue an
aggressive legislative agenda in the improper payments arena
with a series of program, with a series of program integrity
reforms included in the President's 2007 budget.
With the tools of the Improper Payments Act and this
administration's management initiatives hand in hand in effect,
the Federal Government is in a strong position to build on the
dramatic reduction in improper payments achieved this year and
to ensure that an error measurement is provided for all high-
risk programs. With the goal of ensuring that each taxpayer
dollar is spent wisely, efficiently, and for the purpose for
which it was originally intended, we remain committed to
eliminating Federal improper payments. We look forward to
continuing to work with you and this subcommittee and Congress
to see that this objective is accomplished.
Thank you, Mr. Chairman, for the opportunity to speak
before you today. I am pleased to address any questions.
[The prepared statement of Ms. Combs follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. Thank you, Dr. Combs.
Secretary Johnson.
STATEMENT OF CHARLES JOHNSON
Mr. Johnson. Chairman Platts, Mr. Duncan, other members of
the committee, I am delighted to be with you today. Thank you
for the invitation. I am pleased to have Mr. Tim Hill adjacent
to me. He is with the Centers for Medicare and Medicaid
Services.
I have only been at Health and Human Services less than 1
year, but I spent considerable time looking at improper
payments because of my strong belief that we have a genuine
responsibility to the American taxpayer to protect their
dollars.
Although more must be done, I am very pleased with what has
already been accomplished at Health and Human Services. let me
review our seven improper payment programs to give you a status
report, starting with our largest program, Medicare.
The Department has been testing error rates in Medicare for
10 years, going back to 1996. In my judgment, we have a mature,
sophisticated program that is a model for the rest of the
programs in our Department.
In fiscal year 2005, we reported a Medicare fee-for-service
error rate of 5.2 percent. That is a significant reduction from
the 10.1 percent reported in the prior year. Now, this
significant reduction can be attributed to the aggressive
actions that we have taken to require adequate documentation.
This does not necessarily translate into savings in the
traditional sense, but no entity in the world should make
payments without adequate documentation.
Significant error rate reductions from this point will be
more difficult to achieve, but we intend to remain aggressive.
Beginning this year, HHS will produce error rates twice a year.
This increased availability of data will help not only us by
our contractors to better target efforts to reduce payment
errors. We have also adopted more incentives for contractors to
eliminate improper payments.
Let me talk about the State Children's Health Insurance
Program and Medicaid together.
In Medicaid, we have used a number of different pilots and
demonstration projects to eliminate improper payments for this
State-operated program. Much was learned from these projects,
and there is evidence that we have had a reduction in improper
payments where those measures were used. Whereas, Medicare is a
single, consistent Federal program, by design each State runs
its Medicaid program differently. After much review, the
Department made a wise decision. We have concluded that we have
a successful methodology in Medicare, and if we replicate that
50 times, we can achieve the same success in 50 States.
We are now launched on a Medicaid error rate program that
is certain to be successful because it is proven. Now, this has
caused us some delay in our originally intended reporting
dates, but it will prove to be worth it. In the meantime, we
will have interim data that will be useful to HHS and to this
committee.
In 2006, contractors will measure national Medicaid error
rates in 17 States, and by the end of fiscal year 2008, all 50
States and the District of Columbia will be covered for both
Medicaid and SCHIP.
Let me cover the rest of the programs.
Head Start: Under Head Start legislation, grantees are
required to be monitored at least once every 3 years. We
reported the Head Start payment error rate reduction from 3.9
percent in fiscal year 2004 to 1.6 percent in fiscal year 2005,
primarily achieved by reinforcing the requirement that 90
percent of the served population must come from low-income
families.
Foster Care Program: In the Foster Care Program, we
developed a methodology for estimating a national error rate
centered around eligibility, and these eligibility reviews are
required by regulation. The fiscal year 2004 rate was 10.3
percent. That dropped to 8.6 percent in 2005.
The Temporary Assistance for Needy Families, TANF Program.
Although we have had many pilots which were successful, we have
not yet identified an efficient and effective approach for
determining an estimate of improper payments in the TANF
Program. In the meantime, we have installed alternative
procedures to stop improper payments immediately upon
discovery.
States are finding remarkable success in matching various
data bases to look for individuals who are drawing benefits in
more than one State, individuals who are employed in one State
and drawing benefits in another State, and individuals who are
newly employed and are not informing State officials. I am
pretty excited about these data base matches.
Child Care Program. As with TANF, the Child Care Program
legislation gives the States great flexibility in the design
and administration of the program. For child care, we have
initiated an improper payment pilot in which 19 States have
participated. Based upon these pilots, we believe we have a
methodology to valuate participant eligibility, which we have
determined to be our greatest risk area.
In conclusion, Mr. Chairman, Mr. Duncan, the American
taxpayer is well served by the money spent by HHS to combat
improper payments and particularly health care fraud and abuse.
Let me leave you with a very impressive recovery statistic.
Since 1997, we have spent $5.7 billion on Medicare program
integrity work and have recovered nearly $82 billion. That is a
14:1 return rate over the life of this program.
Thank you for the opportunity to give you an update on the
Department's improper payment initiatives, and I will be
pleased to answer any questions you may have.
[The prepared statement of Mr. Johnson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. Thank you, Mr. Secretary.
Mr. Williams.
STATEMENT OF McCOY WILLIAMS
Mr. Williams. Thank you, Mr. Chairman, Congressman Duncan.
I am pleased to be here today to discuss the governmentwide
problem of improper payments in Federal programs and
activities. Our work over the past several years has shown that
improper payments are a long-standing, widespread, and
significant problem in the Federal Government. The extent of
the problem initially had been underestimated because only a
limited number of agencies reported their annual payment
accuracy rates and estimated improper payment amounts prior to
the passage of the Improper Payments Information Act of 2002.
Our work has also shown that primary causes of improper
payments are lack of internal controls or a breakdown in
existing controls.
The act has increased visibility over improper payments to
a higher, more appropriate level of importance. It requires
executive agency heads, based on guidance from OMB, to identify
programs and activities susceptible to significant improper
payments, estimate amounts improperly paid, and report on the
amounts of improper payments and their actions to reduce them.
Further, in fiscal year 2005, OMB began to separately track the
elimination of improper payments under the President's
management agenda.
Mr. Chairman, fiscal year 2005 marked the second year that
Federal agencies governmentwide were required to report
improper payment information in their performance and
accountability reports. The governmentwide improper payment
estimate for fiscal year 2005 exceeded $38 billion, but did not
include any amounts for some of the highest risk programs, such
as Medicaid, with outlays exceeding $181 billion for fiscal
year 2005.
While the Federal Government has made progress under the
leadership of OMB, significant challenges remain to effectively
achieve the goals of the act. For example, while progress has
been made in identifying programs susceptible to the risk of
improper payments, the full magnitude of the problem remains
unknown because some agencies have not yet prepared estimates
of improper payments for all of their programs. We note in my
written statement that seven major agency programs with outlays
totaling about $228 billion have not reported improper payment
estimates. These agencies have been required to report this
information since 2002 with their fiscal year 2003 budget
submissions under previous OMB Circular A-11 requirements.
Further, agency auditors have identified major management
challenges related to agencies' improper payment estimating
methodologies and internal control weaknesses for programs
susceptible to significant improper payments.
We recognize that measuring improper payments and designing
and implementing actions to reduce them are not simple tasks
and will not be easily accomplished. The ultimate success of
the governmentwide effort to reduce improper payments depends
on the level of importance each agency, the administration, and
the Congress place on the efforts to implement the act.
In closing, I want to thank you and the members of the
subcommittee for your continued interest in this issue and
providing important leadership and oversight. I look forward to
continuing to work with this subcommittee as well as Federal
agencies to help address this problem.
This concludes my statement. I would be pleased to answer
any questions that you or other members of the subcommittee may
have.
[The prepared statement of Mr. Williams follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. Thank you, Mr. Williams. I appreciate all of
your testimonies, as well as the written documentation you have
given us. And where I would like to begin is, as I read through
all the written testimonies last evening, a couple issues kind
of jumped out and followup from where we were a year ago. And I
think maybe, Dr. Combs, you in a broad sense and, Mr.
Secretary, to you specifically, with your Department, you know,
this act is now 4 years past its enactment, and yet we have
seven agencies not reporting in any sense about their improper
payments. And a good number of those are at HHS.
I guess first, if we could start--you know, I read some of
the explanation of where we are, especially with HHS and the
cooperation of States when it is Medicaid and some of the
Federal-State partnerships, but, you know, we still are 4 years
down the line, and we are still talking about what we are going
to do, and perhaps in 2007 or 2008 that we will start to see
some estimates.
I guess what I am looking for is a more specific answer to
why it is taking so long in the general sense and then specific
to HHS. Dr. Combs.
Ms. Combs. I think that is certainly a valid question, and,
Mr. Chairman, I certainly add my commendation to you and this
committee for keeping this in the forefront of all of our
minds, because a lot of what we can and should be doing in the
departments and agencies, we must do as a continual
partnership, and we truly appreciate the efforts of you and
your staff in helping us with that.
Mr. Platts. And I wanted to say up front that, one, I do
not want to diminish the good-faith effort that OMB and the
departments and agencies are making, and to acknowledge that
progress has been made in the areas where we have been able to
target it. And that kind of is the reason for the question. We
are not able to maybe target if we do not actually have a good
understanding of what is out there on some of these other
areas. But I agree, it is a partnership, and it has been a very
important working relationship between the departments,
agencies, OMB, and this committee. I apologize for the
interruption.
Ms. Combs. No. Thank you, Mr. Chairman. I do not consider
that an interruption at all. I look forward to this kind of
dialog and continually having this kind of dialog as we work
through these very, very tough issues together.
I guess since we know my good friend Charlie Johnson is
here and he represents what I consider to be some of the best
of the best in the CFO community, and working with folks like
him on a day-to-day basis in the CFO community and knowing of
their commitment and their absolute resilience to making sure
that we are doing better by the taxpayer's dollar on a day-to-
day basis, is an extremely important avenue for us to have and
to continue to work through in these departments. And knowing
he is going to be here to chime in on some of these more
specifics, one of the things I would like to just put on the
record and kind of step back for a minute and let us remind
ourselves of is if you look at the total Federal outlays--and,
Mr. Duncan, I specifically was intrigued by your discussion of
how you continue to convey this to the American people, because
that is very important for us as well.
But if you look at the $2.5 trillion we have in outlays,
and we know that beginning in 2004 we looked at $1.5 trillion
of those, so we identified--about 60 percent of all of our
Federal outlays were identified as being high risk susceptible.
And if you take that down just another step, we had $1.2
trillion or 85 percent of those that we are now looking at in
terms of the error in our improper payments, we have error
rates for 85 percent of that. And, in addition, we have also--
thanks to the help of this subcommittee, we have been looking
at contract payments.
So if you look at the 15 percent that we do not have
measurements for right now that we are going to be addressing
in future years, that 15 percent is $300 billion, and that is a
lot of money by anybody's standards. But when you look at that
and compare it to where we are stepping down from, and stepping
down from that $2.5 trillion, that makes a lot of sense in
terms of where we are. But we have about 28 percent or $659
billion in contract payments that we have looked at.
And then if you look at the rest of where that $2.5
trillion is, you have about $341 billion or so in other
payments that really are not related to improper payments. It
is payments on the debt or compensation.
So if you go back to the programs, just the programs that
we are looking at, you see that we can look at ourselves and,
in good faith, say, yes, we have really been doing a lot of
good work here. And I think it is important to step back from
the total corpus of what the total Federal outlays are and keep
that in mind.
So, yes, we are concerned about that remaining 15 percent.
We are concerned about every single dollar there is. But we
also recognize that we have done a lot, and we have a good plan
and a good path out for addressing the total amount of improper
payments we have.
Mr. Platts. Dr. Combs, I would agree in the sense of the
big picture governmentwide, now that we are in phase two, as
you refer to it, and 85 percent. But if we get to specific
programs--and I will stay aside from HHS before we get to the
Secretary--Agriculture and HUD, if you looked at their specific
programs, you could say, well, in 4 years we have made zero
progress to their specific programs, meaning we are 4 years
down the road without any reporting on possible improper
payments at all.
So while, again, in the big picture we have made progress,
but my question is: Why is, you know, the school programs, why
at HUD the CDBG, you know, specifically them? The law says, you
know, annually they will report on the susceptibility of
improper payments. OMB moved forward in a very timely fashion,
developed the regs and issued them in 2003. Yet 3 years later,
those specific programs have not yet fulfilled the requirements
of the law or OMB's regulations.
Ms. Combs. Well, I agree with you that we have to continue
to focus on those, and we are doing that. But I think the
measurements of improper payments for these particular programs
is due particularly in large part to the size and the
complexity of these programs as well as some resource and
timing issues. Because of the complexity, it is taking a lot
longer in many of these programs to get where we need to be.
Mr. Platts. In several of the programs, prior to the
Improper Payments Act being passed, OMB was already requiring
them, through an administrative requirement, to report. And so
it was not even something new. In essence, they were supposed
to be doing this already through administrative action or
executive action.
If we look at specifically Department of Ag. and school
programs, what has been done for 4 years? You know, and I
guess--is there a plan that has been laid out back in 2003
saying, all right, here is our programs, and here is how we are
going to chip away at getting to a plan, and they actually have
now for 3 years worked on that plan to where they are getting
to where they say in 2007 they think they can finally give an
estimate? Or was there problems along the way that they did not
get started to 2004 or 2005, or they started and changed plans?
I know we are going to get into some of that detail. You do
in your written statement with HHS. And maybe that is--maybe we
want to jump over to HHS and give us some of that detail for
your specific programs with the majority of them being at your
Department.
Ms. Combs. Let me, just before my friend Charlie says that.
Mr. Johnson. Sure.
Ms. Combs. One of the things you are going to hear from
Charlie is what you just asked for, Mr. Chairman, in terms of
the plan and a very well laid out plan. Those are the kinds of
things that are going on in these other departments, too. It is
not like we are ignoring those by any stretch of the
imagination. We have----
Mr. Platts. Were they going on--I mean, since 2003 and 3
years we are still working on the plan?
Ms. Combs. I think you will understand better when my
friend Charlie Johnson talks about the complexity of their
program and their plan. The complexity of the situations that
you have just talked is very similar, and what you also need to
understand is that we really are firm believers in putting
people on this plan, and we have a plan in place, and we hold
people accountable for coming to us and explaining where they
are at each step along the way on these plans.
Thank you.
Mr. Platts. And I appreciate the gentleman from Tennessee's
indulgence as I know I am way over my initial round, so thank
you.
Mr. Johnson. Your question is a very legitimate question.
The same question I asked when I came in and why is it 4 years
after the passage of this act and we are not completed in
Health and Human Services. And I have studied that, and I have
learned a lot about it.
First and foremost, a program that is solely within our
direction, Medicare, we did start that process in 1996. And as
I indicated in my testimony, we have a very sophisticated
program, but that is a program solely within our control. We
design it, we test it, we spend the money for testing improper
errors.
Then we move from there to State programs where we are
participating with States, and I spent the first part of my
government career as chief of staff to Secretary Leavitt when
he was Governor of the State of Utah. So I know the State side
of this, and I guess I have a little bit of appreciation.
But if you take Medicaid, I believe every State has in some
sense been trying to reduce improper payments in Medicaid. I
believe they have been trying in TANF and child care and
adoptions and SCHIP. The difference is when you get down to
trying to get a statistically valid error rate that you can
present for the Federal Government as a role--as a total with
50 different States, that becomes a lot more complicated. And
if we take Medicaid, we have had a lot of programs. We have had
PAM and PERM, and we finally decided, look, this is very much
like Medicare except it is 50 different Medicares instead of
one Medicare. Let's take something that is proven and now start
using that program. But that is an evolution. People go down
paths with good intent, always with good intent, and with good
results by the way.
We do not have a statistically valid number to give you,
but I can tell you that these front-end efforts have reduced
improper payments, but we cannot tell you by how much. So we
have now a plan, and it is in process. We are in process now on
the Medicaid.
When you get to TANF and Child Care, by design the Congress
has said we want States to have a lot of rights in not only
design of that, but in less interference from the Federal
Government. There are certain things we can ask for and certain
things that we cannot. But that is by design. And I understand
that.
So we need to--we have been working for a way to come up
with good improper payment rates without asking for legislation
that forces this upon the States. We have tried to work very
cooperatively with the States. Again, I think we have--in each
of those programs, we now have a plan. But this has been
evolutionary, and this has taken some time. In the meantime, I
can tell you that some of these tools that we have used, we
have had significant recoveries.
I was talking about, you know, the State programs using
these data matchings. There are millions--Pennsylvania I think
was $44 million in matches that they have saved in the TANF
program.
Now, we cannot report that to you as something that is a
reduction in an error rate that we had a baseline and we can
tell you it has moved from this percent to this new percent.
But I can tell you a lot of good things are going on.
But at the end, I have to say we are where we are at HHS,
and I think we now have a place to go forward from that will
get us to where we need to be. But it has been a long and
almost tortuous process to get there, and I concede that.
Mr. Platts. And I certainly appreciate, Mr. Secretary, the
challenge when it is State programs, and that, I guess two
followups, and you kind of touched on the one. While there
certainly needs to be a respect, having come out of the State
House myself, and, you know, States having some autonomy of how
they operate, but the ability of HHS to say, without even
legislation, you certainly have the responsibility of ensuring
against fraud and waste and mismanagement, which would seem to
give you the authority to say to fulfill that statutory
requirement of guarding against that, that this is, you know, a
requirement to participate, because it seems like in the
various programs, the problem has been getting the States
actually to participate in TANF specifically where in
contacting States that, you know, not many took you up on it,
you know, even when you reached out and maybe explained the
benefits of it; whereas, in the D.C. pilot, in the new hires
match, I mean, the numbers are pretty staggering.
Mr. Johnson. They are staggering.
Mr. Platts. Once they ran the program of cutting out the
fraud, in essence, that was going on, and by your testimony, it
is, I think, 31 States, D.C. and Puerto Rico have conducted a
State match. What is the reason you are given for the other 19
States for saying, no, we do not want to save money?
Mr. Johnson. And, again, I think this is one that it
builds. I think you will have another 19 States aboard. We are
bringing States in. We are training them on these data match
programs. We are showing them the benefits of Pennsylvania, and
New York was, again, a very large number.
So I think it is--I call it ``marketing.'' You know, we
have to market these programs, and we are doing that in a much
more aggressive fashion.
Mr. Platts. Because, I mean, if you look at just the D.C.
pilot, a third of the individuals were submitted for the match,
and over 80 percent of those, so basically 25 percent of all
were actually employed based on that pilot. I mean, that is a
huge percentage that were taking advantage of the system.
Mr. Johnson. And it is, and that is why States are finding
success with this. They have new hires matches, and the more
States that get in, then the more people we pick up, because if
somebody vacations in Florida and lives in Pennsylvania, they
may be getting benefits both places. And when you get both
States in it, then it becomes more robust and much more useful.
So, again, it is building but we are not there, and I can see
that.
Mr. Platts. Well, and I appreciate being in the position
for the past year, and your jumping into this and being
aggressive is something I appreciate because as the numbers
tell us, these State-partnered programs are critical to get in
that other 15 percent. I mean, you look at the numbers, you
know, Medicaid in particular is the big one. And when we have
had Comptroller General Walker here and we talk about the
fiscal challenges, you know, facing our country, Social
Security is a problem. Medicare and Medicaid are terrifying.
You know, those are the fiscal disasters that are coming
without changes. And if we just extrapolate the percentage of
the $1.2 trillion that we have looked at over to $38 billion,
if you extract that to the remaining $300 million to go after--
or $300 billion, we are talking maybe another $10 billion on a
conservative end of improper payments, and maybe even more
because of the type programs being State partnership that there
may be a higher propensity. Those are huge sums.
Mr. Johnson. They are. And I think helping to mitigate will
be some of these programs that we had put in place, because we
are going to have huge increases. I mean, Part D is a huge new
increase.
Mr. Platts. Absolutely.
Mr. Johnson. Managed care is growing. But some of the data
mining and some of the things we are doing to check trans-
analysis, claims behaviors, and some of those things will help
us detect it in advance rather than--help us to prevent it in
advance rather than have to detect it later on.
Mr. Platts. Right.
Mr. Johnson. That is our goal. Let's stop it at the
beginning point.
Mr. Platts. I have some followup questions, but I have
overstayed my first round of questions already, and I would
like to recognize the gentleman from Tennessee, Mr. Duncan.
Mr. Duncan. Well, thank you very much, Mr. Chairman. And
you mentioned Mr. Walker, and he has appeared before this
subcommittee and some other subcommittees that I am on, and I
think he is--I really admire and respect his attempt to be a
Paul Revere to try to alert the country to the tremendous
financial problems that we are facing for unfunded pension
liabilities and all sorts of things. And, in fact, I don't know
how in the world we are going to pay all these military
pensions, civil service pensions, Social Security, Medicare,
Medicaid, prescription drug benefits with money that means
anything within a few short years. But at least I do appreciate
the progress that has been made since our last hearing, and I
appreciate the progress that, Mr. Johnson, your Department has
made. And like you, it sounds hopeful, this new data base
information that you are talking about to try to overcome the
duplication of benefits that people might be receiving.
But the GAO report, Dr. Combs, says, ``However, the
magnitude of the governmentwide improper payment problem
remains unknown. This is because, in addition to not assessing
all programs, some agencies had not yet prepared estimates of
significant improper payments for all programs determined to be
at risk.''
Do you disagree with those statements? And assuming that
you do not, how close do you think we are to getting a handle
on this problem, particularly the magnitude of the problem?
Ms. Combs. I think we certainly do understand that there
are about 10 programs out there that--many of which, and one
you just--or two you just head about here--represent about two-
thirds of those 10 programs that we just do not know about yet.
How close do I think we are? I think we are pretty close,
because when you think about the kinds of error rates that we
have found and the risk susceptibilities that we found, when we
first went out and identified 60 percent of all of our outlays
as being risk susceptible, that was a pretty high amount. And
now, you know, of that 60 percent, we are into the 85-percent
category of really knowing what those improper payments are.
And many of these programs over time have had some
measures, and many of them have been pretty stable over time--
some of the very, very large ones, anyway. So----
Mr. Duncan. Well, how do we know that--how do we know that
these reports are accurate? I mean, you know, a lot of people
feel that to really get a true picture in an accounting
situation, you have to have some outside auditor, not somebody
that is inside. And, of course, then we have established over
the last few years all these Inspectors General in all these
departments because we were not satisfied with the accuracy of
the information we were getting from some of these departments
themselves.
Have the Inspectors General in these various departments or
agencies been involved in this process? Or how satisfied are
you with the accuracy of the reports?
Ms. Combs. I am satisfied that we continue to improve that
accuracy, and in the departments and agencies that we do the
best, we have Inspectors General that work hand in hand with
our CFOs and with program managers to help them with their risk
assessments. They help them look at the improper payments as
well as other internal control mechanisms that they need to be
employing. And I think since 2004, this agency reporting has
improved significantly. Inspectors General look at these
reports, as do we, to see if they pass the reliability test, so
to speak. And I think that the effective practices that we
continue to see are strengthened and expanded every year. And
as I said, the programs and the departments that seem to do the
best with these are the ones where we see a close collaboration
and a close working relationship between the CFO and the
Inspectors General.
Mr. Duncan. So we can feel that the OMB is sort of the
outside agency, and GAO and the Inspectors General, that we
really don't need to require some sort of outside audits of
some of these programs. Yes, Mr. Johnson?
Mr. Johnson. I was just going to say, we have used an
outside auditor for this very purpose. In Medicare, our
Inspector General started this system in 1996, and then we have
developed it to a point where it became ready to go prime time,
they have signed off. Then we brought PricewaterhouseCoopers in
to also evaluate, and they have also signed off. So we have
used both Inspector General and the outside auditors that you
are talking about for that particular program. That is why we
know this one works, and that is why we want to replicate it in
the Medicaid area.
Mr. Duncan. All right. Well, I noticed that of the seven
major programs, you have--and you know, everybody in the
Congress wants to do all we can for the veterans, but--and, of
course, in this country--I do not guess there is any developed
nation that even does 10 percent of what we do for our
veterans. But I noticed--but that is an awfully big Department,
but they are not in here. Why is that, Mr. Williams? Are they
just doing a fantastic job where some of these others are not?
Or what can you tell us about that?
Mr. Williams. Congressman Duncan, actually when you look at
the $38 billion, there are three programs from the Department
of Defense that are actually reported that they had programs
with significant improper payments--that actually reported
amounts. It was the health, the benefits, and military pay--
military pay being a new program that reported this year.
Mr. Duncan. So they are included in the----
Mr. Williams. I think the schedule you are looking at are
the ones that did not report that were required to report. But
as far as those that actually did report, there were three
programs that defense reported this year. There were two
programs last year. Military pay is----
Mr. Duncan. Well, no, what I am looking at, it says
improper payments reported in fiscal year 2005, and it says 95
percent were from Medicare, Earned Income Tax Credit, Old Age
and Survivors' Disability Insurance, Unemployment Insurance,
Supplemental Security Income, Public Housing, Rental
Assistance, and Food Stamps. They could be--what you are
talking about could be in the ``Other'' programs, which is 5
percent. Is that right?
Mr. Williams. That is correct. That is correct.
Mr. Duncan. OK.
Ms. Combs. The first seven programs that were assessed, Mr.
Duncan, that you are referring to, I think you are referring to
VA benefits as opposed to DOD. Is that correct?
Mr. Duncan. Yes.
Ms. Combs. It is included in this slice of the pie up here
with ``Other.''
Mr. Duncan. Well, of course, I am also--I am interested in
any of these departments as to, you know, what amounts they are
reporting and whether they are reporting accurately and what
they are reporting. Talk about Mr. Walker. I remember at
another subcommittee of this committee, he told us one time
that the Defense--he was the Inspector General of the Defense
Department before he became head of the GAO, and he told us
that the Defense Department has misspent $35 billion in Iraq
and had lost another $9 billion that they just could not even
account for. That is $44 billion.
Of course, I also remember when I heard Charlie Cook, the
respected political analyst, in a talk one time, and he said he
did not think it was humanly possible to comprehend any figure
over $1 billion. And I am not sure that you even can comprehend
$1 billion.
Now, Medicaid has not given us an estimate. Is that
correct?
Mr. Johnson. That is correct.
Mr. Duncan. Well, Mr. Williams, have the States been
cooperative in providing that information, or what is the
problem?
Mr. Williams. We have another assignment in which we have
looked at the various steps and actions that States have taken.
States have actually been working to try to identify ways in
which they can do risk assessments. It is kind of a mixed bag
as far as the progress that they have made. In surveys that we
did, they basically stated that in doing this particular
process and trying to identify improper payments, that there
were various areas in which the Federal Government could assist
them.
Of course, one of the first things that we always heard was
more money could help us out in this process to help people to
work on identifying the improper payments. But they also
requested assistance in the area of additional guidance,
clarification on guidance that is provided from the Federal
Government. And also in looking at this process, one thing that
we, GAO as an organization, looked at was the possibility of
more coordination between the Federal Government and the
States, looking at best practices, opening communications, and
working at the State and Federal agencies to make sure that
those best practices are out there and, what is working in one
area, that information is spread throughout the rest of the
States so that every effort can be made to reduce this number
to a manageable number.
Mr. Duncan. Well, you know, when you say that they say they
do not have enough money, this is my 18th year in the Congress,
and I cannot tell you how many times I have heard over the
years, every time there is a problem, no matter what the
problem is, they tell us one of two things: either they do not
have enough money, they are underfunded; or their computers are
obsolete. [Laughter.]
I mean, it amazes me.
Now, I will tell you that I read in the Knoxville News
Sentinel, though, a few days ago--they have a Thought of the
Day, and they said, ``To err is human. To err completely
requires a computer.'' [Laughter.]
I put out a newsletter, like I said, with no pictures or
anything, and I cover about 30 topics or so each time I do it,
in just kind of a short way. But I will read one little part of
this part that I wrote about our hearing last year. ``One of
the largest programs, Medicaid, at $175 billion, could not even
be measured. Two days before our hearing, the New York Times
completed a year-long investigation of the Medicaid program in
New York and found billions in fraud and abuse. The chief
investigator estimated at least 10 percent in criminal fraud
and another 20 percent in improper payments. If this figure is
nationwide, this would mean over $50 billion in the Medicaid
program alone that was not included in the $45.1 billion
mentioned above.'' The $45.1 billion was the figure that we had
last year that there has been this progress on.
I mean, was the New York Times--do you think they were way
off base? You know, I do not suppose we are really going to
know this problem and how big it is until we find out a little
bit more about this Medicaid. Do you all think that there is
any possibility that the New York Times was right and that
there could be a 20-percent improper payment figure on Medicaid
nationwide?
Mr. Johnson. I am going to ask Mr. Hill to answer that. I
can tell you that there are--because I do not want to
speculate, but I can tell you that we have some programs, for
example, where we match Medicare recipients against Medicaid
recipients, the so-called Medi-Medi program. And we do find a
lot of Medicaid errors in that situation, where people are
drawing, you know, both. And so I think it is fertile ground,
but States have an incentive to control that because they get
to keep the money. They keep their share of the funding. And so
they are not without great incentives and great rewards.
I would mention also that you had talked about more money.
In your Deficit Reduction Act, you did give some funding now
for Medicaid integrity. I think it is $5 million the first year
and then $50 million each year thereafter for the next 4 or 5
years.
But, Tim, Mr. Hill, would you care to speculate on the New
York situation?
Mr. Hill. I think I would be surprised, quite frankly, if
the rate was 20 percent across the country. I think that in New
York in particular, when you have an investigator who wants to
make a point----
Mr. Duncan. Surely you would not question the New York
Times, would you, Mr. Hill? [Laughter.]
Mr. Hill. I do not question the press. But I would say,
speaking to Mr. Williams' point, and as Charlie highlighted,
the DRA provided significant resources to do a lot of the
things that the GAO has asked of us, sort of working with the
States to export best practices across the States, match data
to be sure that the States have everything that they need to
continue the incentives that they have to find the improper
payments that are there, because as Secretary Johnson said,
they have as much, probably more incentive than the Federal
Government does to find and eliminate improper payments because
their budgets are as strapped or perhaps even more strapped
than the Federal Government's. And so they definitely have a
vested interest in finding those improper payments.
Mr. Duncan. You know, I do not hear anything from Medicaid
people on their bills, but I sure hear from a lot of senior
citizens who are upset about things that they find on their
hospital and medical bills that they think--services or things
that they think they never received that popped up. I do not
know how widespread that is, but well, all right, thank you
very much. It does sound like we are making some progress. I
hope, Mr. Chairman, you will keep moving on this and
particularly that we need to followup with some of these
agencies and departments that are not reporting and see what we
can find out about that.
Mr. Platts. Well, Mr. Duncan, that is actually my next
focus, the fact that eight of the departments say they have no
programs susceptible to improper payments, and two in
particular I would like to focus on, and probably, Dr. Combs
and Mr. Williams, if you want to comment. According to the
information, DHS is a Department with about $40 billion in
outlays saying they have no improper payments--or no programs
susceptible to improper payments. In the 2005 audit, the
auditor said that--cited DHS as being in noncompliance with the
Improper Payments Information Act and went on to say that it
failed to institute a systematic method of reviewing its
programs and identifying those it believed were susceptible to
significant erroneous payments and for not performing test work
to evaluate improper payments for all of its material programs.
So, you know, in the number we have, it is encouraging--and
I want to get into even the drop that we see from 45 to roughly
38.5, but part of that number last year and again this year is
these two programs, DHS. And we know that the auditor is saying
they actually did not comply with the law, yet they get the
report saying we do not have any programs, and then for DHS
specifically, you know, we look at GAO's review of the Katrina
relief, and just in one program, the Individuals and Households
Program, where there were significant flaws found and about
$5.5 billion was given, and just in the one aspect of that, the
debit card recipients, that 5,000 of the 11,000, so almost half
of the recipients gave false names, addresses, Social Security
numbers.
So, I mean, we have clear evidence of improper payments,
yet we have the Department saying we do not have any programs
susceptible. So how does the Department get away with saying
it? And what does OMB do in response to their saying they have
no programs, yet the auditor says, well, you did not even
follow the law, and GAO has found evidence that, yes, they have
significant improper payments being made?
Ms. Combs. Thank you for asking about that because, one, we
are pleased a risk analysis was done at DHS, but we, too, have
concerns that there needs to be a deeper look at DHS. We have
talked with them. We know that there are a couple components
they have reported on. We are pleased with that. We have an
assessment of the situation there, and through their PAR, of
course, they report on this. But more importantly, and
consistently throughout the year, they report through the
President's management agenda. And we have asked them to look
at closing the reporting gaps that have been identified by the
Inspector General, and we have looked at their plans. We
continue to work with them on their plans. And we are
continuing to hold them accountable to expanding both their
recovery audits as well as--well, particularly their recovery
audits because a lot of what they do is contracting. But we
have also asked them to do a deeper dive into their program
areas and to give us their plan on that as well.
Mr. Platts. So exactly what message is conveyed from OMB to
the DHS Secretary and then his subordinates that, you know, you
have given us, OMB and the American people, a statement that
you have no programs, but we know from your audit you actually
did not do what you needed to do to make that assessment? In
essence, I guess what I am asking, in this specific case--and
it really relates to a broader--because at HHS, while I may not
be pleased that we are 4 years down the road and we are talking
maybe another 2 or 3 years before we get to where we want to
be, but there seems to be an acknowledgment of the risk out
there and a good-faith effort to get their hands around it.
With DHS it seems they are just saying, hey, you know, we are
not at risk, even though we know they did not comply with the
law. So what consequences? Was there any recommendation that
the CFO be reprimanded, that, you know, any Secretary,
Assistant Secretary, anybody be held accountable for failing to
comply with the law as the auditor is telling the Department
did?
Ms. Combs. Well, I think the corrective action plans that
we require them to do are looked at by the highest levels in
the agency, and certainly one of the things that we are asking
them to put these tools in place, such as the accurate
measurements and to really assess and dive deeper into their
analysis.
We have the same concerns that you are expressing regarding
the particular analysis that was done, and I do know that
particularly in the one program--and I assume you are
specifically referring to FEMA when you talk about that.
Mr. Platts. Right.
Ms. Combs. We know that they have already put a measure on
the street to go in and look at that, much like what Secretary
Johnson talked about in terms of the assessment that they do
with the internal controls. We know that those kinds of things
are taking place. Are they taking place at the speed which we
would hope and we would like? Not necessarily, and that is why
we are asking them and holding them accountable for that.
Mr. Platts. And one of your challenges, Dr. Combs, is--you
have been asked today and regularly to defend the actions of
others that you do not have direct say over, and I would not
want to be in your seat.
Ms. Combs. Well, I can assure you, this is the first
experience--normally, in my entire career, I have been in line
management jobs, and it is a bit different.
Mr. Platts. And I guess my belief--and in this case, it is
dealing with improper payments. At other times it is
mismanagement of financial management programs being not well
planned and GAO has assisted us in what should be done up front
that, unfortunately, many times has not been done, and so we
spend millions and realize it will not work.
But does OMB--I mean, you are the one who is given this
information, and then you are called on to respond about it in
this case. It seems to me that it would be appropriate of OMB
to go to the White House and say, listen, you know, the
President's management agenda, this Department is not
fulfilling the requirements of the law, 2002, or the
regulations that OMB has passed pursuant to law. And the White
House needs to get engaged and say to Secretary Chertoff and
his subordinates, Follow the law or else.
I appreciate that there is--as we are doing oversight, you
do, in essence, oversight. But it is kind of on an even playing
field. Unless it comes from the White House back down, it is
equal partners to some degree. Is there any of that kind of
dialog to try to pursue consequences for a major Department
spending $40 billion, not following the law, to be held
accountable from the Secretary on down for what the auditor
tells us is violation of Federal law?
Ms. Combs. I can assure you that the President's management
agenda is taken seriously by the Department, and when and if
you ever or GAO or the internal Inspector General find things
that really need to be followed up on, those are followed up on
by senior-level people talking to senior-level people in those
departments and agencies. The transparency that is created by
the President's management agenda where people are given scores
and it is publicly held out there for everybody to see, says to
everyone we are expecting and demanding of you the kind of
behaviors and the kinds of efficiencies that you are demanding
as well.
Mr. Platts. In those scores--and, actually, one of the
things I did not understand. In my understanding, in the
current eliminating improper payments scorecard, DHS actually
has moved up to a yellow. I guess I was not certain of how they
get a yellow when the 2005 audit is telling us, well, they are
actually not doing the test procedures, they are not complying
with the law. So what is it that they did that allowed them to
move up on the scorecard, despite not complying with the laws
and OMB regs?
Ms. Combs. There is a plan that they have presented to us,
and those are assessed at least quarterly for every department,
and some departments we look at on a monthly basis because we
feel like we cannot let a quarter go by. We just need to
address the accountability issues more frequently than that.
But the things that they are held accountable for are
presenting a plan where they will show certain progress, and if
they achieve certain progress on the accurate measurement of
their high-risk programs, for example, or sound corrective
action plans toward reduction targets would put them in yellow.
But that is only a quarterly score, and if they do not meet or
keep up the next quarter's or the next month's even plan
relative to that, then, of course, we use those scores to move
them back to red.
In this particular case, they had certain deliverables that
they were presenting to us. We held them accountable for those,
and we found that they had achieved those specific
deliverables. And that is why they were rated yellow.
Mr. Platts. And that would be, in essence, since the bulk
of the 205 year, which is what the auditor was looking at,
those are encouraging words, perhaps, that they are moving
forward with the plan.
Ms. Combs. Yes.
Mr. Platts. Even if they were not in compliance in 2005,
that they are working toward compliance.
Ms. Combs. Yes.
Mr. Platts. Am I taking that----
Ms. Combs. You are taking that exactly correctly. I think
Secretary Johnson will know, as I, too, have been the receiver
of those scores when I was CFO, a little bit of a help and push
to say, OK, you are on the right path now, we want you to stay
there, is a big help to many of the people who are responsible
for doing this in the departments and agencies.
Mr. Duncan. Mr. Chairman, I have some people waiting for
me. Can I get into one----
Mr. Platts. Yes, please do.
Mr. Duncan. I assume that just about everybody here knows
this, but there might be somebody here who does not, that we
are talking about not just payments to beneficiaries but
improper payments to employees and also Government contractors.
But what I am interested in, Mr. Williams, last year, we were
given language by the GAO that said that the agencies found
that more than 60 percent of Government outlays for fiscal year
2004 are $1.4 trillion, now $2.3 trillion, is at risk for a
significant level of improper payments.
Now, do you know where that figure came from? Or has that
figure gone down, or is that still basically--and by saying it
is at significant risk I assume does not mean that--I mean, I
know it does not mean that much was made--was improperly paid,
but that is what is at risk.
Mr. Williams. That number is based on the agencies, the
individual agencies, doing their own assessments. And it is
just a compilation of pulling together that information from
all of the major agencies within the Federal Government.
Mr. Duncan. And how do you think that was--maybe you do not
know, but how do you think that was determined? In other words,
in one respect that is a real high figure. On the other hand, I
guess depending on how you define the words, you could say that
100 percent of the Federal budget was at risk for improper
payments, could you not?
Mr. Williams. I think what you have here is a process in
which, first of all, we have not--at GAO we have not done an
assessment of drilling down and looking at that particular
process. But it is obvious that when you are doing a risk
assessment and you are looking at this process across as many
agencies that we have in the Federal Government, that there is
probably some variation in the methodology, the processes, and
the procedures as to how to go about doing the assessments. But
we have not drilled down.
What we have done, as far as this particular legislation is
concerned, is in the initial stages we have focused on what we
think is the big picture, and that is looking at the major
components of the legislation, what agencies are required to
do, and based on that we are looking at are they actually
reporting, are they doing the assessments, to get past that
first phase and then what we would anticipate as we get down
the road is to start taking a closer look at some of the
specifics that are called for, such as what is the quality of
the risk assessment.
For example, you had mentioned a while ago about the
auditors actually attesting to whether these are reasonable
numbers or not. I would say in that particular area that you
probably have a process in which what we have done is looked at
what the auditors have said, and we have had no reason to doubt
their statements that they have made in their reports. And a
couple examples that we were just talking about here was the
Department of Homeland Security in which there was no number
reported, and yet the auditor stated that the overall
assessment could be improved, is one way of putting it.
Another one was the Department of Justice. If my memory
serves me correctly, it basically fell into that same category
of that group of eight that said that they had no programs that
were susceptible to significant risk. Yet the auditors in their
report identified a particular program in which there was no
risk assessment.
I think it is too soon--and I will link in one of the other
questions that you asked also as to what do we think that
number should be. Should it be as high as $50 billion? I think
it is too soon to tell exactly what that number should be. I
think that there are a lot of things that still need to be done
in order for us as a Federal Government to get our hands around
this particular process. Those are just a few of the things I
just mentioned right then. We have not looked at all of the
programs. I do not know if I am comfortable as an auditor--or I
cannot say as an auditor at this particular point in time that
I am comfortable that the risk assessments that are going on
across the various agencies is something that I am comfortable
with. I think you can just look at the conversation that we had
a few minutes ago about the Department of Homeland Security.
There are other factors that I think would need to be
looked at when we start talking about this area because there
has been discussion in the past about the issue of significant
improper payments. There are various things that could go on as
far as, you know, how you look at the word ``significant.'' I
can give you an example of where we currently have the criteria
of $10 million and 2.5 percent. I think there are a couple of
ways that you can look at that. If you have a program--if you
have an organization that has 10 programs and in order to hit
that 2.5 percent, you would have to also have $10 million. And
each 1 of those 10 programs came in at 2.4 percent, and they
came in at $9.9 million. When you put them all together as an
agency, you are talking $100 million, yet none of them would
have to report under the requirement that we have here.
So there are a lot of things that I think we have to still
take a hard look at, continue to work toward the progress that
we have seen over the last year before we can be in a position
to say with what I would call good confidence that we have a
handle as to what that number really is. I think there are just
too many uncertainties right now and too much work still to be
done.
Mr. Duncan. Let me just conclude, because I am already
running late, but because of what I said at the start of this
about the financial condition of the Federal Government, which
we all know about, I do not see how any work that you could be
doing would be more important than trying to get a handle on
this problem and doing something about it. And I appreciate the
work that you all are doing and the progress that has been
made.
Obviously, though, the problem is much bigger than the $45
billion down to the $37 billion that we are talking about here
today, as good as that is, I mean, because if you have
potentially even more waste than that and fraud than that in
just the Medicaid program, and then we have so many other
departments or agencies or programs that are not reporting. But
I sure hope that we keep on working on this and hopefully do
even better in the future.
Thank you very much, Mr. Chairman.
Mr. Platts. Thank you, Mr. Duncan. Again, appreciate your
participation. I want to come back where I was on the issue of
those that report that they don't have anything at risk, like
DHS. One of the reasons I ask specifically about what followup
happens between OMB and the departments when they come back and
say that is in a visit to a NASA center, and I asked the CFO
about their improper payments, you know, with a lot of
contracting and things, you know, what it was, and the response
was, ``We don't have any.'' And I said, ``Well, how do you know
that?'' And the response is, ``Well, we just don't have any.''
In other words, it didn't leave me very reassured that there
was actually what the act requires, a review, a risk assessment
actually done. That is what worries me when I see eight, one of
them DHS, which has FEMA in and of itself, that says, ``We
don't have any,'' and especially when you look at the whole TSA
aspect of contracts that we know, huge sums that were made
inappropriately.
I want to make sure that, Dr. Combs, from what your
testimony was, that those eight that are saying that, that
there is a healthy dialog, interaction between OMB and those to
really be looking at how they come to that conclusion and how
they are going to substantiate that conclusion. And I am
correct in that understanding, that dialog is occurring?
Ms. Combs. You are correct that dialog is occurring and
will continue to occur. NASA, you mentioned them specifically,
they had reported under the recovery audit, and I'm not quite
sure what the person meant that they didn't have any, but
consistent with the recovery auditing requirement, the outlays
that we notice from NASA are, of course, primarily in the
administrative and contract funds, and those are being
monitored very, very carefully and will continue to be.
Mr. Platts. And that actually is the followup on NASA
specific, and, Mr. Williams, I am going to eventually get to
you on DHS and NASA, but recovery audits is one of the other
areas I wanted to touch on, and specifically with NASA, because
my understanding that the amount subject to review for NASA was
about $12 billion, and yet they only reviewed about $82 million
worth of the contracts, and have they given you an explanation?
Are you aware of an explanation of why they reviewed, as part
of the recovery audit process, such a small fraction of what
was eligible for review?
Ms. Combs. I think the amount that they identified for
recovery was $617.
Mr. Platts. Right, $617,000.
Ms. Combs. And they recovered that entire amount.
Mr. Platts. Out of the $82 million they reviewed, but there
was about $11.3 billion that they chose not to review.
Ms. Combs. Correct.
Mr. Platts. Why, with the ability and authority to do it,
is there any reason you are aware of that they have not engaged
in that review, as the law provides for?
Ms. Combs. I think one of the things that is on their plan,
in fact, I am sure of it, for 2006, right now, is that they are
reporting on their overall spending this year in 2006, and
they're going to include even more contracting categories in
their review this year, and that is the kind of dialog we are
continuing to have with them on this particular issue. And we
just need further expansion from them on this. I agree with you
on that.
Mr. Platts. So on the 2006 part we would expect to see a
much larger number actually reviewed than we did?
Ms. Combs. Yes.
Mr. Platts. And that is the type of direction we want to
see.
Ms. Combs. That is right.
Mr. Platts. Is that we use the tools that have been given
to all of us to pursue the worries out there, because of the
$300 billion that was reviewed, I guess, about a half billion
was found to be inappropriate and was collected. I think $557
million was identified as improper, of which $467 million was
then----
Ms. Combs. Was actually recovered.
Mr. Platts [continuing]. Recovered, which is great for the
American taxpayer. Again, I do a lot of extrapolation of
numbers, and I know that could be dangerous, but if it
extrapolate that $300 billion reviewed and a half billion
recovered, if I extrapolate that to NASA's amount they didn't
review, it is maybe $20 million that is probably likely and
appropriate on just a straight extrapolation that we are at
risk of not getting if we don't do the review.
Ms. Combs. We're certainly concerned about that, and that's
the kind of thing that we look to GAO, to the IGs, to partners
such as yourself, that when and if those kinds of programs are
found, if there are any specific programs that people feel like
we should dive into deeper and have more dialog with these
departments and agencies than we're currently having. As you
know, we've talked before with your staff. There are seven or
eight programs that don't fall within the threshold of the law
or with our 2\1/2\ percent in addition to that, that we monitor
on a very careful and regular basis simply because we believe
that there are specific situations out there that deserve and
merit additional administrative oversight.
And we are committed to doing that, and certainly, thanks
to this committee, we've had other opportunities to include
that in our future guidance that's coming out, and I think your
folks have been looking at that already with us, but it was in
direct relationship to conversations such as this that we've
had, that we've been able to come up with additional and better
guidance.
Mr. Platts. I believe that has happened with NASA and with
Gwen Sykes and her efforts of having all those Center CFOs and
Center Directors working more hand-in-hand with headquarters,
to have a more complete picture and understanding of their
financial challenges and better management across the board. I
think that is occurring, and sounds like with the recovery
audits at NASA, one more step in the right direction, you are
going to expand what they are actually reviewing.
Ms. Combs. And there again, too, that is an example also of
how an administrative management change in structure within the
organization made a big difference in how they are able to hold
people accountable, and bring the transparency needed to make
those things happen.
Mr. Platts. If we could give you the same authority over
all the department agencies that you have to answer for here,
as Gwen Sykes was able to finally get with the Center CFOs,
that would help a lot for your ability to get them to do what
you are after, right?
Ms. Combs. Some people think my title, Controller--
[laughter.]
Mr. Platts. With Director Bolten, who went over to the
White House, you know, maybe OMB is going to have a stronger
reach there.
Ms. Combs. It helps to have friends everywhere.
Mr. Platts. Mr. Williams, I wanted to get your thoughts,
comments on specifically DHS and the fact that the auditor did
find them in noncompliance, yet they report no risk, and then
also on NASA, but especially on DHS, the noncompliance issue.
Then the other half of the recovery audits is that DHS,
although they report that they reviewed all of their amounts,
the amount they report as reviewable was a small fraction of
what they actually are contracting, so it seems like we are--
again, what we reviewed was good, but there is a whole bunch
that we didn't review that probably should have been. If you
can talk specifically on DHS on those two aspects,
noncompliance with Improper Payments Information Act and the
recovery audit aspect?
Mr. Williams. Yes. As I was mentioning earlier, when you
look at an organization that first of all had 10 material
weaknesses and two reportable conditions, seven noncompliance
issues including the Improper Payments Information Act, one of
the things that we have talked about in all of my testimonies
going back to before the act actually became law, we always
focused on what was the root cause of improper payments, and it
would always get back to the lack of internal controls or a
breakdown in internal controls. So you have an environment in
which there are numerous internal control weaknesses that have
been identified by the auditor, and one issue, as far as
compliance, in which based on their work, they basically
concluded that the agency did not comply with the requirements
of the act.
Having said that, that could be several factors that the
agency might have looked at and determined that it was in
compliance. It could be, again, that we may get back to this
issue of looking at the 2\1/2\ percent as far as how the
programs were divided up, and you could have large numbers here
in which you might need to do some of the things, as Dr. Combs
mentioned earlier, in which there are some programs.
I have done an analysis of the programs that reported in
2005, and if it had not been for that additional requirement
that OMB placed on the agencies, the numbered issue, instead of
being about 38 billion, would have only been about 34 billion
because if you take a look at one of my schedules in here, it
basically lays out those agencies that even though they
reported, they pointed out that they reported because OMB had
mandated that they provide that information this year, and that
if it had not been for that mandate, then they would not have
been required to report.
So you could have some of that going on at the agency also.
I'm not for sure, but that is a possibility of a cause, but as
I said, there's several agencies here, and the total come to
about 4.3 billion that would drop that number down to about 34
billion issues. DHS could have that situation, or it could be a
situation in which the agency is just getting a handle on what
needs to be done. I think the focus, as has been stated here
earlier today, is pressure needs to be maintained on the agency
to comply with the requirements of the act, and efforts need to
be put out there so that everyone understands that this is
important legislation, this is the American taxpayer dollars
that we're talking about that's going out the door, and it is
very important that we get a handle around this issues. And the
sooner we get a handle around the issue, the better off we will
be as far as that particular problem is concerned.
So those are some of the things that I would say in that
area, that there needs to be some dialog between, I would say,
the agency, OMB, and as well as the Congress, because it's
going to take pressure from, I think, all of those
organizations in order to make sure that we have that comfort.
Because I have not see anything, as I said earlier, I have not
seen anything in the auditor's report, because Homeland
Security is one of my agencies that I look at under the
consolidated financial audit work that we do each year, and I
have not seen anything that would give me any reason to doubt
the conclusions that the auditors reached as far as the
compliance issue is concerned here with Homeland Security.
As far as the Recovery Act is concerned, I guess overall I
concur with some of the statements that have been made today,
that we are seeing progress here. I can recall last year when
we talked about this particular component, and I think I made
the statement that there had been about $60 million collected,
and I think I was asked, ``do you mean 60 million or 6
billion?'' And I said, ``No, it's only 60 million.'' So
progress have been made, but again, there's a lot more that I
think that can be done in this particular area.
There are a lot of techniques, procedures that are out
there that we call best practices. One of the things that I
always like to highlight at these hearings is that we at GAO
have put together a publication called Strategies for
Addressing Improper Payments. It's got a lot of techniques in
there. We always suggest that the agencies take a look at this.
I know that CFO PCIE subgroups that's working on improper
payments have mentioned it in some of their guidance. We
encourage people to continue to look at that and try to make
sure that they're following those best practices and trying to
address this issue as far as recovering the money if it were
possible.
Mr. Platts. I agree, again, going from 60, and roughly 450
or so million, heading in the right direction. The higher we
get that number, the better in the sense that we are recovering
more, but ultimately we want it to be lower because we are not
making the improper payments to begin with. So that sort of
goes to the whole internal control issue. I do want to touch on
that with Dr. Combs.
Before I do, Secretary, I have given you and Mr. Hill, a
breather here while I was working with GAO and OMB.
Mr. Hill. We're good with that. [Laughter.]
Mr. Platts. I do want to touch one issue that the ranking
member, he is going to markup, the gentleman from New York, Mr.
Towns was hoping to get here, but they have a lot of votes in
committee, so he has been detailed. But he did have one issue
he wanted to be addressed specifically with you, with the
claims processor or other contractors who are used by Medicare
in the payment process. In what fashion are they specifically
responsible for the accuracy of the payments that are passed
through them, and should it be strengthened in their level of
responsibility as a processor to verify the information?
Mr. Hill. We absolutely think it should be, you know,
accountability should go right down to the folks who are
processing the claims. I think it's fairs to say that the
Medicare Modernization Act has provided us a real robust set of
tools to make sure that accountability is flowing through down
to the FIs and the carriers, fiscal intermediaries and carriers
we call them, who process the claims.
Prior to the MMA, the contracts that we had with these
entities were an anachronism of the enactment of the Medicare
statute. They were very odd in the contracting world. We had
very limited flexibility to actually hold those contractors
accountable for how well they process claims or how well they
did a lot of something. They were cost based, very difficult to
get rid of the contractors.
The MMA gave us the authority to contract with these
entities just as any other contract, under FAR authority, where
we can hold them accountable in any number of ways to
accomplish the work for the Medicare beneficiaries that they
do. And one of the ways that we are specifically going to hold
them accountable is to incorporate in their performance metrics
on a go-forward basis how well they do at reducing error rates.
As Secretary Johnson said, beginning in 1996 we measured
error rates at a national rate. Beginning in 2003 we were
actually able to disaggregate that national rate to specific
carriers and FIs. So now I can say for New York or for
Pennsylvania or for Tennessee, what the carrier or the FI for
that State, how well they do in processing those claims. It
wasn't until, though, the MMA was passed and we had this new
contracting authority that actually could say to a contractor,
``Unless you get that rate down or do something to keep it
stable, you know, we're going to take some action.'' Now we
have the ability to either build in as part of a fee pool, use
it as part of a competitive range determination on a go-forward
basis to how well or who we are going to contract with, to say,
``Look, if you're doing a good job, you're going to get a
benefit for it. If you're not doing a good job, it's going to
look negatively upon you as we continue to compete these
contracts.''
Mr. Platts. So you basically have built in, going forward,
a financial incentive for them to be more dutiful in their
reviewing of the claims.
Mr. Hill. Absolutely.
Mr. Platts. That is good to hear, and I am sure the ranking
member will be glad to hear that. With extending that, that is
in Medicare specifically. Again, with Medicaid, it is
complicated, and you obviously don't have the same program. Is
there something you are looking at, how to try to create that
same incentive on the Medicaid side, and is the structure so
different that it doesn't----
Mr. Hill. Their relationship for us is with the States.
It's not with the--the States have those relationships with
contractors, and I think, you know, in some States where they
have fiscal agents, they do use those sorts of incentives to
keep----
Mr. Platts. But it is really a State decision.
Mr. Hill. But it's a State decision, and, you know, our
incentives or disincentives would apply to States to keep their
rates down. I think that becomes complicated on a whole bunch
of different levels.
Mr. Platts. Thank you.
The GAO has been working with the State programs as far as
a set of recommendations, and, Mr. Williams, if you wanted to
kind of walk through your recommendations that you have
supplied to OMB, and how to assist the State-Federal
partnership programs to reduce improper payments. If you want
to kind of give a capsule summary of those recommendations.
And then Dr. Combs and Secretary Johnson, if there are
specific, you know, your thoughts on the recommendations that
have come forward and kind of where they stand, that would be
great.
Mr. Williams, you want to start?
Mr. Williams. Yes, a quick synopsis. You basically asked us
to take a look at what the States are doing in this particular
area, given the fact that out of the $2 trillion budget, about
$400 billion each year is going to the States to administer
Federal programs. So we wanted to see what was happening on
that side of the equation because there is some responsibility
on the State parts also to make sure that the money is making
it to the ultimate recipient.
We interviewed various people. One of the things that we
found in looking at this is that there were basically only two
programs nationwide in which there was a statutory requirement
that improper payment information be reported. One was the food
stamp program. The other was the Department of Labor, the
unemployment insurance program.
We found that in the various States, the States were
actually using some of the tools that we've talked about today,
and doing risk assessment and other techniques in an effort to
recover improper payments.
Along the lines of what we're recommending is that we found
that OMB had put together some guidance, and we had a couple of
recommendations to OMB to clarify a couple of components of the
recommendations. For example, the clearly define what stated
minutes their programs represented, and a couple other areas
that we talked about.
In addition to that, we also had a recommendation that the
Federal agencies work closely to communicate with the States
and work with the States on how to go about doing the risk
assessments and estimating improper payments.
And, finally, we had a recommendation that focused on point
that I had made earlier, and that is, OMB, Federal agencies and
the States need to work together in every way possible, and get
together to make sure that the lines of communications are open
so that best practices are shared among organizations. So these
are some things that we recommended that we think will improve
the lines of communications and help the States become a
stronger, larger partner in this effort of addressing the
improper payments problem.
Mr. Platts. And would an example of that be that best
practices like the TANF pilot program and new hires match?
Mr. Williams. That's correct.
Mr. Platts. As we see that expand to 31 and eventually,
hopefully, all 50, be the type thing you are looking for?
Mr. Williams. Exactly. When you've got best practices like
that, you want to expand it in every way possible until you've
hit the entire universe.
Mr. Platts. Dr. Combs.
Ms. Combs. Yes. We have concurred with the GAO
recommendations, each and every one of them, and thoroughly
appreciated what information we were able to get from that. We
also believe, yes, there was need for some clarity on some
specific areas, and one of the best practices that we have not
talked about here today was the State of Tennessee, in one of
their highway project as well that was done. But again, as Mr.
Williams just said, getting those best practices out there will
encourage others to do the same.
We are very committed to that. In fact, I personally met
with some finance folks when they were in town for a
conference, who are representatives in the States, their
respective States, to hear from them and just hear if there are
some things that we're not doing that we could do to reach out
to them and to form better alliances and better relationships,
and we intend to do quite a bit of followup with that, and
having more frequent communications between our offices and
them to help share those best practices.
I think Secretary Johnson mentioned a marketing effort a
while ago in his testimony, and that's a lot of what this
sharing those best practices is all about. So we concur with
the GAO recommendations.
Mr. Platts. Secretary?
Mr. Johnson. Two things come to mind. We have, for example,
in TANF program, set up a Web site where States can enter their
best practices and share, which would include these data
matches. That's one thing that comes to mind.
The other thing is this so-called A-133 single audit, where
we ask that there be a single audit at States, and trying to
expand the use of that a little bit, where we take specific
programs and ask that in any given year that the auditors
concentrate on that program to try to give us a better error
rate and improper payment rate, through that means. So we've
been experimenting with that with some States and finding some
success. Now again, not everyone is going to do it and we're
looking at ways to market that, if you will.
Mr. Platts. I had the pleasure of speaking last year, and I
forget the name of the group. I will say the American
Association of Financial Managers--Association of Government
Accountants. I was close--nor really. But I was there briefly,
came in, got a chance to address and then had to come right
back to D.C. But is there outreach at those settings? I kind of
look at that as a continuing ed. opportunity where these best
practices are shared, to encourage--because I know the brief
time I was there I met a number of officials from Illinois, a
number of States that were there at that national conference.
Is there a sharing of this best--is that an example of the
marketing that is done?
Mr. Johnson. That would be a good example. We try a lot of
areas to do that. NCSL, the Secretary has spoken there, every
opportunity. But we can do a lot more. I mean we're just kind
of just getting the vision of what you can do through those
kind of organizations, so I really think there's a lot more to
be done.
Mr. Platts. I would think the environment is perfect. With
the Deficit Reduction Act, a lot of what we did on the Medicaid
side was actually--it was the National Government Association's
recommendations, bipartisan, although you would never believe
it by the criticism level at those of us who supported it, but
it was using the knowledge of the State officials to say, here
is the flexibility we need to ensure the integrity of the
program so we can truly help those who need help, as opposed to
those who want help but don't necessarily need it. So that
sharing of information I think is so important.
And having participated in NCSL, and ALEC myself in my
State House days, I know that from a law-making perspective
those are very helpful forums to learn what works already,
rather than reinventing the wheel.
Mr. Williams. Mr. Chairman, I would like to add, given that
my boss is the former president of AGAA, he----
Mr. Platts. Don't tell him I got the name from him.
[Laughter.]
Mr. Williams. I will not. The Association has put on
workshops over the last year that focus specifically on
improper payments issue, how to go about--in the Northern
Virginia chapter, I should say, there's been presentations
there, workshops on how to go about doing sampling and other
procedures as far as addressing the Improper Payments Act.
Mr. Platts. I am glad to hear it, because, again, all the
various avenues when--hopefully the States won't need to be
coerced but will see the numbers and the benefits of doing it.
As you move forward with the marketing and the outreach,
certainly if there are specific legislative hurdles that we
needed to address, like MMA address with Medicare that we
should be looking at, we welcome that feedback in these
programs as you move forward, especially with the various HHS
programs as you are moving forward with the plans, if there is
additional authority, we are glad to hear, certainly in that
case, energy and commerce with Medicaid, and we want to give
you the tools to do what we are asking you to do.
Ms. Combs. Mr. Chairman, before you leave that subject.
Mr. Platts. Yes?
Ms. Combs. I will say that the organization that you
mentioned has been very effective in an outreach. They ask our
office very frequently to serve on panels and to serve as
keynote speakers, so it is an effective organization for
getting our message out there. We have taken full advantage of
that whenever we possibly can. People on my staff have served
on panels. We've had people who have helped because their
organization acts to work through specific programs with them,
and that specifically was the group that was in town, and got
some State people together. So those organizations are very,
very helpful and effective, and I appreciate their partnership
as well.
Mr. Platts. Glad to hear it.
I actually have one final question, Mr. Williams. I just
wanted--if I made my notes right when we were talking about DOD
with Mr. Duncan. Was I correct that you said of 38 programs at
DOD, they said just three were susceptible?
Mr. Williams. Of all of the programs at DOD, there were
three programs that reported. That was up one from last year to
the best of my memory. In 2004 there was Military Health and
there was Military Benefits. In 2005, Military Pay was added.
But, again, this is another program that if you look at the
information that is reported in the PAR report, DOD makes a
point of pointing out that these are programs that we are
reporting because OMB has mandated that we report these numbers
because they are former A-11 programs. But we do not believe
that these programs have met the 2\1/2\ percent criteria, but
we are reporting it because we have been mandated to do it by
OMB. And those are the three programs that I believe we saw in
the 2005 report, with no pay being added.
Mr. Platts. Out of the entire department, right?
Mr. Williams. Yes, this is department wide, as far as
improper payment reporting.
Mr. Platts. So in a department that is spending half a
trillion dollars, they believe only three programs have
susceptibility and they really don't believe that. They are
only reporting it because----
Mr. Williams. That's correct, because it's being mandated,
exactly.
Ms. Combs. Let me just also add that they also are
reporting on their contract payments as well, and you got to
remember, most of what they do there is contract payment, so
they're reported on--they reviewed something like 223----
Mr. Platts. Right, on their recovery audits. That is a good
point. I stand----
Ms. Combs. In all fairness.
Mr. Platts [continuing]. Partially corrected.
Ms. Combs. We'll give some credit when we can.
Mr. Platts. So maybe in the 2005 year they were probably at
about $450 billion, and to about half they actually did review
through recovery audits, and--I mean their total budget about
$450 billion, and they recovered $418 million.
Mr. Williams. That is correct.
Mr. Platts. So it is larger than----
Mr. Williams. It's 473 is the amount that was identified
for recovery, and about 148\1/2\ was actually recovered in
2005.
Mr. Platts. OK.
Ms. Combs. I think the other point to make on this, that
the outlays, they're tracking and reporting on about 71 percent
of their outlays.
Mr. Platts. Right. And so about 30 percent they are not
reporting on currently, but they don't really believe that they
have any program susceptible----
Mr. Williams. Significant.
Mr. Platts. Yes. Of significant improper payments.
Mr. Williams. Yes. But this is an organization in which we
have financial management at the Department on our high-risk
series, and this is another agency at GAO that I have for
responsibility for from the financial management arena. And we
have, over the years, reported on various material weaknesses.
Again, I get back to what I've testified is the root cause for
improper payments in various areas.
And I guess the final point that I would also like to add,
while we do have these recovery audits, this is good to have in
the overall scheme of things, but with the weaknesses in the
agency's inability to have audited financial statements in
their reportable conditions, I've always pointed out that in
this particular exercise, you want to make sure that you have--
and I think it's been said earlier today--you want to make sure
that you have those control techniques that prevent the horse
from getting out of the barn in the first place, so to speak,
and you want to make sure that you have a lot of those, given
some of the departments that we've reported on in the past.
Mr. Platts. A point well taken, and it goes to the
Secretary's comment earlier that we want to get to where we are
not worried about recovering, but just preventing. And that is
an issue we talk about a lot, the internal control issue, and I
know they will be reporting here in the next couple months, in
June, I guess, with the requirements.
Ms. Combs. On their internal controls.
Mr. Platts. Right, on their internal controls, which
hopefully they will translate to even more effectiveness on
improper payments.
Ms. Combs. Oh, absolutely. They are going to track hand-in-
hand.
Mr. Platts. Great. Mr. Williams, you have DOD, you have
DHS. Are you able to sleep at night? [Laughter.]
You have to be worried about all those dollars, right?
Mr. Williams. That's correct.
Mr. Platts. I want to thank all four of our witnesses and
your staffs for your assistance in preparing for the hearing,
your written testimony, your testimony here today and your
answers to the questions. I sincerely appreciate the importance
of the partnership between OMB, the departments, GAO, Congress,
all of us who are after the same thing, which is ensuring that
we spend the taxpayer moneys wisely, efficiently and
responsibly, and certainly that is what you and your staffs are
dedicated to, and we appreciate those good faith efforts, and
wish you success, especially at HHS. You have some huge
challenges and especially in the State administered programs.
We want to see you succeed, and any way that we can be of
assistance as a committee, please let us know. But again, thank
you.
We will keep the hearing open for 10 days for any
additional information that needs to be submitted. Otherwise,
the hearing stands adjourned.
[Whereupon, at 3:58 p.m., the subcommittee was adjourned.]
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