<DOC>
[110 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:41449.wais]
S. Hrg. 110-501
ELIMINATING AGENCY PAYMENT ERRORS
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HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, FEDERAL SERVICES, AND
INTERNATIONAL SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JANUARY 31, 2008
__________
Available via http://www.gpoaccess.gov/congress/index.html
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
----------
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Washington, DC 20402-0001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES,
AND INTERNATIONAL SECURITY SUBCOMMITTEE
THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
BARACK OBAMA, Illinois GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri PETE V. DOMENICI, New Mexico
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
John Kilvington, Staff Director
Katy French, Minority Staff Director
Monisha Smith, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Carper............................................... 1
Senator Coburn............................................... 4
Senator Levin................................................ 20
WITNESSES
Thursday, January 31, 2008
Daniel I. Werfel, Acting Controller, Office of Management and
Budget......................................................... 6
McCoy Williams, Managing Director, Financial Management and
Assurance Team, U.S. Government Accountability Office.......... 8
Hon. Charles R. Christopherson, Jr., Chief Financial Officer,
U.S. Department of Agriculture................................. 25
Anthony J. Dale, Managing Director, Federal Communications
Commission..................................................... 26
Charles E. Johnson, Assistant Secretary for Resources and
Technology and Chief Financial Officer, U.S. Department of
Health and Human Services...................................... 28
David A. Rust, Acting Deputy Commissioner for Disability and
Income Security Programs, U.S. Social Security Administration.. 31
Alphabetical List of Witnesses
Christopherson, Hon. Charles R., Jr.:
Testimony.................................................... 25
Prepared statement........................................... 88
Dale, Anthony J.:
Testimony.................................................... 26
Prepared statement........................................... 96
Johnson, Charles E.:
Testimony.................................................... 28
Prepared statement with attachments.......................... 102
Rust, David A.:
Testimony.................................................... 31
Prepared statement........................................... 121
Werfel, Daniel I.:
Testimony.................................................... 6
Prepared statement........................................... 47
Williams, McCoy:
Testimony.................................................... 8
Prepared statement........................................... 53
APPENDIX
Question and Responses for the Record from:
Mr. Werfel................................................... 129
Mr. Dale..................................................... 137
Mr. Johnson.................................................. 140
Mr. Rust..................................................... 145
Charts submitted for the Record from Senator Carper.............. 154
ELIMINATING AGENCY PAYMENT ERRORS
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THURSDAY, JANUARY 31, 2008
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, Federal Service,
and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:34 p.m., in
Room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Subcommittee, presiding.
Present: Senators Carper, Levin, and Coburn.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. All right. The hearing will now come to
order. Welcome, one and all, and to McCoy Williams and the real
Danny Werfel. Thank you for joining us today.
And to our second panel of witnesses and others--some of
our colleagues will be coming in and out, and we look forward
to their joining us.
When is Ground Hog Day? Is it in February?
Senator Coburn. It is a movie.
Senator Carper. I know it is a movie. But when it comes to
this issue of improper payments, I feel a little bit like
Ground Hog Day. This is something we have continued to visit
and revisit, and we should.
I think the President, this current Administration, decided
early on in their first term to make the issue of improper
payments part of the President's Management Initiative, and, as
I recall, the Improper Payments Information Act was enacted--I
want to say around 2004? Does that sound right? Or was it a
little before that?
Mr. Werfel. 2002.
Senator Carper. Maybe we came online in 2004 in terms of
folks actually having to comply with it or beginning to comply
with it.
And although we made a lot of progress in those last
several years, there is still a whole lot of progress to be
made, and I know that, and I think we all realize that.
We spend a whole lot of time around here talking about
numbers. We are talking about a stimulus package that might be
$140 billion, $150 billion, $160 billion, so, after a while,
numbers like that begin to lose their meaning or impact.
But I want to take just a moment to put in perspective the
number of $55 billion. And $55 billion is what we believe for
2007 was the amount of improper payments made by agencies, some
of it overpayments, some of it underpayments, but mostly I
think overpayments.
But when we try to say, well, what does it actually mean,
it is about one-third of what we are discussing for a stimulus
package. And over here, on these charts,\1\ an improper payment
imbalance of about $55 billion would be--it looks like it is
more than the GDP of Croatia, more than the GDP of Slovakia,
and about the GDP of Vietnam.
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\1\ The charts referred to appears in the Appendix on page 00.
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And if you actually look at the second chart closest to Dr.
Coburn and me, you can see that $55 billion would be the
combined GDP of 44 countries, some of them pretty small
countries. But Delaware is a pretty small State. So they are
still countries, and they count.
But in any event, $55 billion is real money, and it is real
money that we are concerned about, and ought to be concerned
about.
I think, Dr. Coburn, when we were here about a year ago, we
had a similar kind of hearing. We were looking at improper
payments of closer to $40 billion. And we expected--I expected
it might be bumped up a little bit because we are covering in
2007 some other major programs like Medicaid, the school lunch
program, and the school breakfast program are reporting for the
first time, so there is more that is really coming under the
microscope here of improper payments, and so we should not be
surprised that it has bounced up a little bit.
But again, it is a lot of money involved, and it is money
that we have to be concerned about, and I am. Dr. Coburn is,
and we know the Administration is, and we want to make sure
that we continue to focus on it and be vigilant on it so that
we continue to ratchet this number down as time goes by.
I think there are some major programs that we have yet to
bring under the umbrella of scrutiny under improper payments. I
believe Temporary Assistance for Needy Families might still be
out there. I want to say that the State Children's Health
Insurance Program is still outside their surveillance, if you
will, and Medicare Prescription Drug Program, which is about a
$50 billion a year program. These are all actually very
substantial programs that are still outside of the improper
payments surveillance. And as they come on board, I think next
year, I would not be surprised to see the $55 billion bump up
again a little bit, but my hope as to what happens as we go on
beyond that is that programs start actually reducing improper
payments. And some of those programs that have been under the
gun since 2004 actually are seeing the incidence of improper
payments come down.
So we know that some progress is being made, and we are
mindful of that and grateful for that. It is positive, but
there is a whole lot more that needs to be done.
Earlier today, I have introduced legislation, legislation
that Senator Coburn and I and our staffs have worked on. We are
calling it the Improper Payments Elimination and Recovery Act.
I wish we could think of a good acronym for that, Senator. I
bet if we put our hands to it, we could. I-P-E-R-A. I do not
know what we call that, but we could probably come up with some
acronym. We have them for everything else.
But it is legislation that is designed to make what I think
are some dramatic improvements to the way that agencies
identify and root out their improper payments problems. And it
really comes after a couple of years, maybe 3 years, of our
focusing on these issues as a Subcommittee under Dr. Coburn's
leadership and mine. It is the stuff we both care about and
have worked on together, and we will continue to do that going
forward.
Our bill starts by improving transparency. OMB, right now,
has set the reporting threshold for improper payments too low,
meaning that millions of errors go unreported and potentially
unaddressed each year.
Let us take for example, if we would, the Medicare Part D
Program. If we use the rubric $10 million or 2.5 percent--it
has to be both--in order for us to be analyzing a program for
improper payments. And 2.5 percent of $50 billion is--what
would that be, $1.25 billion dollars. That is a lot of money.
And under the current guideline, we do not trigger improper
payments reporting threshold unless we exceed $10 billion and
2.5 percent. Then unless we are talking about something in
excess of $1.25 billion dollars of improper payments, Medicare
Part D would not be reporting or taking remedial action.
And I do not think that is too smart, and maybe some of the
rest of you do not either. That is about half of the budget of
the State of Delaware on an annual basis for a reference point.
But I think we need to lower the reporting threshold so
that Congress and the general public have a better picture of
the problem that we face.
This bill would also help to prevent improper payments from
happening in the first place by requiring that agencies come up
with detailed corrective action plans and error reduction
targets. It would also implement a recent recommendation from
GAO--and I just want to say our thanks to McCoy Williams and
others at GAO who have given us good input as we try to craft
this legislation.
But we want to implement a recent recommendation from GAO
that calls on OMB to develop a process whereby agencies would
receive regular audit opinions on the financial controls used
to prevent improper payments before they happen.
This bill would also force agencies to be more aggressive
in recovering improper payments that they make. I think in an
ideal world, we would like to have no improper payments. We
know that we all are human. We make mistakes, including Federal
agencies. So the goal should be to figure out how we can make
fewer improper payments.
But as long as we are improperly spending $45 billion, $50
billion, $55 billion, we need to be able to go out and do the
recoveries, too.
Some agencies and most private sector firms regularly go
over their books to identify payment errors and to get back
overpayments made to contractors and others that they do
business with. I do not think we have done enough of that in
the Federal Government, and as you can see from the charts,
where we have improper payments, which shows that we have
bounced between $45 billion and, say, $55 billion since Fiscal
Year 2004.
The chart that reflects overpayments that have been
recovered. And I think we can probably do better than that.
And eventually, we want to do a whole lot better by taking
the top line there and bringing it back down, heading back down
towards zero. And in the meantime, while there are these
improper payments, we want to take overpayments recovered and
we want to send that up a little bit higher on the chart.
So there is work to do there. But even as agencies report
greater improper payments, we are seeing actually fewer
improper payments recovered.
And what we propose to do in the legislation is to change
this by requiring that all agencies with outlays of $1 million
or more perform recovery audits on all of their programs and
activities, if doing so is cost effective. I will say that
again, if doing so is cost effective.
If it is not cost effective, then we are not going to
insist on that, and we should not.
Finally, and perhaps more importantly, this bill would hold
agencies accountable. Today, as I mentioned, some agencies do
not appear to be taking the responsibility to deal with their
improper payments problems as seriously as we would like to see
happen. I want us to compel agencies to hold top managers
accountable for their progress or the lack of progress and
doing something to take better care of the tax dollars we
entrust to them.
I look forward to working with my partner, Dr. Coburn, on
this issue, and we are going to continue to focus on it, and we
look forward to working with our witnesses here and the
agencies that all of you represent.
It is not acceptable for us to know the amount of improper
payments that we make every year and then to sit around
watching the payments, improper payments, grow and know that we
are not actually recovering more of those dollars. That is not
acceptable.
As I like to say, if it is imperfect, make it better. This
is imperfect. We can make it better, and, with the efforts of
all of us, we will. Thank you. Dr. Coburn.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. Thank you, Senator Carper, for having this
hearing. You all are not the enemy. I understand that.
So as we discuss this, please take our comments in the
light that we are trying to solve this problem. I have a
statement for the record--I would like to have put into the
record, if I could.
Senator Carper. Without objection.
[The prepared statement of Senator Coburn follows:] ???
Senator Coburn. First of all, I do not believe the number
that we have, I think it is about twice that. I sat and looked
at Medicare and then I looked at what was just recently been
documented in the State of Florida. Just by capturing one ring
of people in Medicare, we dropped the billings $1.4 billion,
$1.4 billion just by breaking up one ring of false billing.
I do not think our numbers are accurate. We say Medicaid
improper payments are $13 billion. I think it is that in New
York State alone based on what I am looking at and what I am
seeing.
Do we really have a handle? And what we really know is we
really do not, especially in the bigger programs. And there is
some things we are going to talk about with OMB in terms of,
with the direction that has been given, we allow NASA to use
anything under $500 million is not to be looked at. Well, that
cannot be right. And that certainly is not what we intended.
The impending financial crisis that we are seeing a little
peak right now, as the world looks at the value of our dollar
and whether or not we can repay the borrowings under which we
are trying to operate for the next generation, it is really
going to become important that you all in all your areas of
expertise cut no slack in this area.
And I know each of you are dedicated to that, but I think
the biggest problem is that we do not really yet know how big
the problem is. We still have lots of agencies that are not
even about doing the first things to develop how big the
problem is.
So when we look at the number, what we know is the number
is not right. And, the one thing as an accounting major is it
is the old computer adage, if the numbers we are putting in are
not right, the numbers we are going to get out are not going to
be right as well.
So, when we are looking at a portion of the pie, granted we
are looking at a bigger portion of what we did, and that is to
all of you, you should be complimented in terms of we are
making progress, but it is not near to the level that we need
to be, and it is not to the degree we need to be.
And I compliment Senator Carper in working with us on this
new bill. We are not quite comfortable yet, I am not, in terms
of how aggressive I want it to be, and how, because of what we
have seen, how we limit some of the flexibility in this.
But nevertheless, I think it is a very important that we
are moving in that direction, and I thank him for it. And I
will redirect most of my questions and my statement as we get
into the questions. Thank you.
Senator Carper. Thank you, Dr. Coburn.
Our first witness is Daniel I. Werfel, the Acting
Controller of the Office of Management and Budget. And in that
position, I understand that you lead OMB's efforts to improve
government-wide financial management improvements and oversee
work in priority management areas such as property management,
one that we are very much interested in, and thank you for your
help, and in improper payments, too.
I understand you hold a master's degree in public policy
from Duke and a J.D. from the University of North Carolina.
That is an interesting juxtaposition--I think I have mentioned
that before--and you were a starting quarterback at the
University of Florida. That is quite a triumph for a guy----
Mr. Werfel. I get around.
Senator Carper. You do. You get around--spread pretty thin.
But we are happy you are here. Thank you for being here again
today, and it is nice to see you again.
And we also are pleased to welcome back McCoy Williams. It
is a good thing you do not charge us by appearance before this
Subcommittee. We would be broke.
But we are happy that you are back, and we appreciate very
much the work that you and your colleagues at GAO do with us in
this effort and others, but I am told you are the Managing
Director of the Financial Management and Assurance Team in the
U.S. Government Accountability Office. This team is GAO's
largest unit with oversight of financial management and audits
across the Federal Government.
Mr. Williams has over 27 years of experience on these
issues, and he has received numerous GAO awards, including the
Distinguished Service Award for Exemplary Leadership. He holds
an M.S. in Accounting from Virginia Commonwealth and is a CPA.
And with that said, gentlemen, we see you not as the enemy,
but as our colleagues on this initiative, an important
initiative, and we are delighted to have you here today.
I am going to ask Mr. Werfel to be the lead-off hitter, and
then we will turn it over to Mr. Williams.
And your entire statements will be made part of the record.
Feel free to summarize as you wish. Thank you.
STATEMENT OF DANIEL I. WERFEL,\1\ ACTING CONTROLLER, OFFICE OF
MANAGEMENT AND BUDGET
Mr. Werfel. Thank you. I would like to begin by thanking
Chairman Carper and Ranking Member Coburn for having this
hearing today and inviting me to speak.
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\1\ The prepared statement of Mr. Werfel appears in the Appendix on
page 47.
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Four years ago, the President and Congress charged Federal
agencies to identify, measure, and eliminate improper payments
across government. In each of these areas--identification,
measurement, and in elimination of improper payments--
significant results have been achieved.
Today, OMB issued our annual report on improper payments
that summarizes results from Fiscal Year 2004 and outlines a
path forward for addressing ongoing challenges and building on
the results achieved to date.
I would like to begin by briefly going over the results for
2007.
First, in terms of identifying improper payments, under the
current legislative and regulatory framework, Federal agencies
are expanding the universe of high-risk programs that are
measured and are audited each year.
Agencies identified $1.9 trillion in program outlays to be
measured for improper payments and subjected an additional $330
billion in high-risk contract payments for recovery auditing.
This means that 80 percent of all Federal outlays are being
actively measured and/or reviewed for improper payments.
Second, in terms of measuring improper payments, the
Federal Government is making steady progress toward closing all
reporting gaps so that the full extent of government-wide
improper payments will be available in the next few years.
Agencies are reporting measurements on 85 percent of all
program dollars deemed high risk for improper payments,
including 14 programs reporting error measurements for the
first time this year.
Third, in terms of eliminating improper payments, once an
agency has identified and reported improper payments, it has
demonstrated the ability to implement corrective actions and
reduce those errors in subsequent years.
The error rate for the group of programs that first began
reporting in Fiscal Year 2004 has declined from an original
high of 4.4 percent to 3.1 percent today. This represents a
$7.9 billion reduction in improper payments.
Similarly, programs that first reported in Fiscal Years
2005 and 2006 have seen improper payments cut in half,
representing a $2.3 billion reduction.
Now, we must look forward to Fiscal Year 2008 and beyond.
We believe that we are well positioned to sustain current
progress on the identification and measurement of improper
payments. However, to eliminate the $55 billion in improper
payments reported in Fiscal Year 2007, Federal agencies need
additional tools.
Our top priority going forward is to obtain those tools
through these following strategies.
We must start by maximizing the impact of our program
integrity efforts. Nine programs account for 90 percent of the
government-wide improper payment total. We must ensure that
agencies are implementing effective improvement plans in these
programs before initiating additional activities in lower-risk
areas.
Within these nine programs, agencies must target the
largest causes of error and utilize return on investment
analyses to inform on the best uses of program integrity
resources.
Where are the largest sources of improper payments? Today's
OMB report concludes that the largest source of error is the
inability of programs to verify eligibility information. In
fact, program eligibility errors account for approximately 80
percent of government-wide improper payments and are a primary
cause of error in our largest nine programs.
Our report also identifies, thankfully, the most effective
approach for addressing this problem and that is through
verifying applicant data with third-party data sources.
The President's budget, therefore, proposes several
initiatives that will expand agency access to third-party data
sources in programs such as unemployment insurance, which is
one of the nine programs that I mentioned earlier, and we need
Congress to support these proposals for expanding access to
third-party data sources.
Congressional action is critical, not only for data
matching, but for other tools that agencies need to eliminate
payment errors.
Specifically, each year since 2003, the President has
proposed discretionary funding for activities with a proven
track record for reducing error and generated program savings.
These proposals are often referred to as cap adjusted
funding. Despite anticipated savings of nearly $4 billion over
10 years, Congress has enacted only a small portion of these
proposals and did so only in 2006.
When the cap adjustments are combined with the President's
other proposed legislative reforms for improving payment
accuracy, the anticipated savings total approximately $18
billion over 10 years.
Thus, for every year that these proposals are not enacted,
the Federal Government and, therefore, the taxpayer loses
approximately $1.8 billion in unrealized error reductions and
savings.
The Congress and the Executive Branch must work together to
expand access to third-party data sources to verify applicant
eligibility, to fund and implement program integrity activities
with a proven track record for eliminating error, and to enact
legislative reforms that facilitate error reduction in our
highest and larger dollar programs.
Initiating these improvements will be essential if we are
to meet the President and Congress charge to eliminate improper
payments.
Thank you, again, for the opportunity to testify today, and
I look forward to answering your questions.
Senator Carper. Good. Thanks very much, and I look forward
to coming back and just revisiting, among other things, the
things that you need for us to do at our end of Capitol Hill.
OK. Mr. Williams, your whole statement will be made part of
the record. Feel free to proceed. Thank you.
STATEMENT OF MCCOY WILLIAMS,\1\ MANAGING DIRECTOR, FINANCIAL
MANAGEMENT AND ASSURANCE TEAM, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE
Mr. Williams. Thank you. Mr. Chairman, Dr. Coburn, thank
you for the opportunity to be here today to discuss agencies'
efforts to address key requirements of the Improper Payments
Information Act of 2002 and the Recovery Auditing Act.
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\1\ The prepared statement of Mr. Williams appears in the Appendix
on page 53.
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Since 2000, we have issued a number of reports and
testimonies aimed at raising the level of attention given to
improper payments.
In addition, OMB has played a key role in the oversight of
the government-wide improper payments problem. For example, in
2005, OMB established eliminating improper payments as a new
initiative under the President's Management Agenda.
OMB also continues its commitment to address government-
wide improper payments by working with the agencies to
establish corrective action plans and address their root
causes.
Mr. Chairman, Fiscal Year 2007 is the fourth year that
Federal agencies were required to report improper payment
information. Agencies reported improper payment estimates of
almost $55 billion in their Fiscal Year 2007 PARs or annual
reports, an increase from the Fiscal Year 2006 estimate of
about $41 billion.
The reported increase was primarily attributable to the
Medicaid program reporting improper payments for the first
time.
We view this as a positive step to improve transparency
over the full magnitude of improper payments. The $55 billion
estimate consists of 78 programs in 21 agencies and represents
about 2 percent of total Fiscal Year 2007 Federal Executive
Branch agencies' government outlays of almost $2.8 trillion.
In addition, the $55 billion largely consists of improper
payments made in eight large programs, such as Medicaid and
Supplemental Security Income. Collectively, the eight programs
account for about 88 percent of the total estimate.
Mr. Chairman, while showing progress, major challenges
remain in meeting the goals of the Act and ultimately improving
the integrity of payments.
For example, not all the agencies reported conducting risk
assessments of all of their programs or activities as required
by Improper Payments Information Act (IPIA). Also, for risk
assessments conducted, we and selected OIGs have raised
concerns regarding the quality of the risk assessments
performed. Further, the total improper payment estimate does
not yet reflect the full scope of improper payments, as
agencies have not estimated for 14 risk susceptible programs
with outlays totaling about $170 billion.
Additionally, non-compliance issues continue to exist. For
example, some agencies did not measure improper payments for a
12-month period, as generally required by OMB's implementing
guidance, nor did the estimates reflect improper payments for
the entire program.
Agencies also reported that statutory or regulatory
barriers may limit corrective actions to reduce improper
payments.
Mr. Chairman, with regards to recovery auditing, 21
agencies reported identifying about $121 million in improper
payments for recovery and actually recovering about $87
million, a decrease of about $217 million when compared to the
reported amount identified for recovery in the prior year.
Most of the decrease can be attributed to DOD's decision to
stop reporting voluntary refunds received from contractors.
Mr. Chairman, I would like to emphasize that effective
internal control calls for a sound ongoing invoice review and
approval process as the first line of defense in preventing
unallowable contract costs. Prevention is always preferred to
detection and collection.
In closing, we recognize that measuring improper payments
and designing and implementing actions to reduce them are not
simple tasks. Further, while internal control should be
maintained as the front line of defense against improper
payments, recovery auditing holds promise as a cost effective
means of identifying contractor overpayments.
We are pleased that agencies are identifying and reporting
on more risk susceptible programs and have reported that
overall program error rates have decreased since IPIA
implementation. Yet we also note that both we and agency
auditors continue to identify deficiencies in agencies' efforts
to comply with IPIA.
Successfully meeting the requirements of IPIA and the
Recovery Auditing Act will require sustained attention to
implementation and oversight to monitor whether desired results
are being achieved.
Mr. Chairman, this concludes my statement. I would be
pleased to respond to any questions that you or other Members
of the Subcommittee may have. Thank you.
Senator Carper. Thank you very much, Mr. Williams.
Mr. Werfel, I think you said in your testimony that about
80 percent of the outlays are now covered. What was--$1.7
trillion?
Mr. Werfel. One point nine trillion dollars in outlays are
currently identified as high risk on the program side. And on
the contract side, we are reviewing an additional $330 billion
in contracts each year.
Senator Carper. OK. So under the law, do you have to look
at high-risk program sources, is that the way it works?
Mr. Werfel. Yes. The law basically establishes a
requirement that agencies break up their outlays into two
buckets. One are the low risk and the other are the high risk.
And, as you mentioned in your opening remarks, OMB in our
guidance indicates that the definition of a high-risk program
is one that has a 2.5 percent error rate and $10 million in
error each year. That is the assessment that the agency makes,
and if they make that assessment, then all the requirements of
the law trigger, going out and statistically sampling and
measuring those programs, implementing corrective actions, etc.
And under that framework, even with the $10 million and the 2.5
percent, we are still seeing agencies identify a tremendous
amount of programs and outlays and activities as high risk, as
I mentioned $1.9 trillion out of the $2.8 trillion in total
Federal outlays.
Senator Carper. All right. What is still out there that we
have not covered? You said 80 percent of our high-risk outlays
are now covered? Just describe for us the ones that are not. I
seem to recall it is Temporary Assistance for Needy Families
(TANF) and----
Mr. Werfel. Yes. Well, those programs have been identified
as high risk. The $1.9 trillion figure that I provided are all
those programs that are in a universe of programs that need to
be measured.
Now, we have not measured all of them. We have measured 85
percent of all those outlays. And the remaining programs that
still need to be measured are the programs that you mentioned.
There is TANF. There is the Child Care Development Fund. There
is the non fee for service components of Medicaid. There is
Medicare Part D Prescription Drug and a couple of other
programs.
The Department of Homeland Security identified 12 new
programs this year as being high risk and because this was the
first year they have been identified, we do not have
measurements for them yet, but will in the coming years.
Senator Carper. So when we say--I want to make sure I have
got this right--$2.8 trillion of overlays overall?
Mr. Werfel. That is correct; $2.8 trillion.
Senator Carper. And they are not all high risk?
Mr. Werfel. Not all of them are.
Senator Carper. Of that $2.8 trillion, how much would be
high risk?
Mr. Werfel. One point nine trillion dollars in program
dollars; $330 billion in contract payments.
Senator Carper. So a little over $2.2 trillion would be
high risk?
Mr. Werfel. That is correct.
Senator Carper. Of that $2.2 trillion, 85 percent agencies
are actually beginning to measure?
Mr. Werfel. They are actively measurement. We are reporting
a measurement for 85 percent of all the programs that have been
determine high risk, and----
Senator Carper. And out of that 85 percent of the $1.9
trillion, we have determined that in 2007, there is $55 billion
worth of improper payments; is that right?
Mr. Werfel. That is correct.
Senator Carper. All right. And what additional programs
come on line in 2008?
Mr. Werfel. The 12 programs for the Department of Homeland
Security will be coming online next year. And--let me see--
Temporary Assistance for Needy Families will be coming online,
Child Care Development, and then the Managed Care and
Eligibility portions of Medicaid and State Children's Health
Insurance Program (SCHIP).
So a significant chunk of the remaining programs will be
on. The only remaining programs after next year that will be
left to measure and report on will be Medicare Advantage Part C
and Medicare Prescription Drug Part D. And those we are
targeting a Fiscal Year 2010 report date.
So as I mentioned, right now, of the $1.9 trillion, 85
percent we have an active measurement on, and that is the $55
billion. By next year, we will have over 90 percent of that
$1.9 trillion measured and reported on.
Senator Carper. I think I understand. Good. You mention in
your testimony, you talked about a couple of the largest
sources of error, and I think you mentioned that ID benefit
eligibility. Just give us a couple of examples of that.
Mr. Werfel. Well, many of the programs that I--remember I
said that there were nine programs that make up 90 percent, and
those programs, just to rattle off some of them, Food Stamps,
public housing, Medicaid--those programs are what we call--or
Social Security--those are means tested programs where the
program has to make a determination of whether certain
eligibility criteria are met.
And typically, the way those programs are designed, a
person is eligible based on their income status, their work
status, their household status, and it is verifying that
information is being reported to the Federal agency accurately
is our number one challenge.
So an individual comes to apply for a benefit, and let us
say the eligibility criteria are that the adjusted gross income
for that individual's household has to be $50,000 a year or
less. And that individual reports a $45,000 adjusted gross
income for their household.
Well, when we sample these payments and we go down and we
find whether we made mistakes or not, we often find that
individuals are underreporting their income, or, if they are
not underreporting income, we are taking in the income
information wrong, however the mistake happens. We do not have
an accurate assessment of what that individual's income is, and
there are methods that we can use to validate that information
that we are not currently utilizing today.
I think one of the simple-to-understand examples is with
the unemployment insurance program. When individuals go back to
work, we need to stop paying them unemployment insurance. And
often, they get back to work. The Department of Labor does not
realize in time that they are back to work, and we are still
issuing them unemployment checks. And how do you fix that? And
that is one of our challenges, and we believe that these types
of third-party data sources, where we can go out and validate
that John Smith on December 15, was he working or not, before
we make that payment, that is the type of things we need to do.
And as an example, one of the President's Budget legislative
reforms is to enhance a current database that is out there
right now to improve the Department of Labor's ability to go
out and get that information on accurately determining
someone's work status.
Senator Carper. In my last term in the House, in 1991 or
1992, one of the things that we worked on was trying to make
sure that folks who were applying for affordable housing,
public supported housing, to make sure that they were eligible
by income. We had some folks that did not report their
employment status and their income. We wanted to try to make
sure that a benefit that was scarce and that is affordable
housing, public housing, was made available to people who were
truly needy.
And what we ended up doing was to try to go through the
Department of Labor to find out who is working and to get
information that as timely so that when people went to work we
could get the information quickly for program verification.
I think that is the kind of third-party initiative that you
are interested in getting some help on.
But my time has expired for this round. I want to come back
and just go back to that point, particularly to focus on how
can we be helpful with respect to the Administration's
initiatives in this regard and other related ways. How can we
be helpful in making sure that the agencies have the tools to
do their jobs, including the benefit eligibility piece?
All right. Thank you. Dr. Coburn.
Senator Coburn. Thank you. The last thing we want is make-
work for the agencies, and the OMB cited the change that
actually--you changed the annual review.
What statute or regulation do you use to cite the authority
to deviate from that was required by this law for an annual
review? What did you all use to give you the authority to
change what the Congress has said about annual reviews?
Mr. Werfel. Dr. Coburn, let me first clarify that I have
the right deviation in mind. Are you referring to----
Senator Coburn. From the risk assessment.
Mr. Werfel. From the risk assessment. OK.
We look at the Improper Payments Information Act as
establishing at its outset a risk management framework. It
requires agencies to not look at every dollar across the board
and trigger all these activities, but to do a risk assessment
and break things up into low risk and high risk.
Once a program is identified as low risk, the agency looks
at it and says we have information available to us based on the
complexity of the program, based on the number of times Federal
funds change hands, etc., whatever process they go through.
They have identified as low risk, and then we had a question to
ask ourselves in terms of how to implement the bill.
Once it has been designated as low risk, what should we
require the agencies to do each year in order to continue to
validate its low-risk status.
Senator Coburn. I do not have any problem with that. Where
did you get the authority to change what we told you to do?
What did you use to say--what we said in the law is we require
you to make a risk assessment yearly, not every 3 years,
regardless of what you have done, that is what the law said?
All I am asking is where did the authority come to change
that? What do you cite as an authority? I am not saying it is
not common sense. I am not disagreeing with it. I am just
saying where did you get the authority to do that?
Mr. Werfel. We believe that the authority is in the
Improper Payments Information Act. It is the provision that
requires a risk assessment generally, and our interpretation of
that provision and we may have differing interpretations. Our
interpretation of that provision is that once a program is
designated low risk, we are not telling agencies to ignore that
program and to put it out of their minds completely.
We require in our guidance that agencies have to reevaluate
that program if exigent factors or new factors emerge, like the
program changes or there is an influx of money into that
program or conditions change, and it is the fact that the
agencies have to keep apprised of potential changes, because
they have done a baseline risk assessment and found it low
risk.
Senator Coburn. Yes. But let me use a specific example. We
had a hearing about CDBG block grants. We had a great look at
it. This is somebody that is low risk, and yet in our hearing,
the Inspector General found $100 million in fraud and abuse and
only 35 of the 1,080 grantees. That is just at the first 35
they looked at--$100 million in fraud.
And yet, under your program, it is low risk. They do not
have to do another risk assessment.
So where do we catch this so that this falls back in? I am
not critical that you say people. We do not want them to keep
doing the same thing. But here you got CDBG block grants, with
$100 million out of the first 35 programs that they looked at
of fraud and documented fraud, and yet, they fall outside of
what your guidance is to say that they do not need to do a risk
assessment. And yet, it is $100 million going out the door
every year.
How do you firm that up? You are trying to accomplish
something on the front side to not give anybody make-work, but
how do we catch it on the backside when it obviously missed it,
and we want to pick it up?
Mr. Werfel. That is a good question. The way we would focus
on this problem going forward is the risk assessment that
initially designates a program as low risk needs to have been
sound; otherwise the framework that I just outlined does not
really work that well.
Senator Coburn. So where does HUD fall back in this,
because under your guidance right now HUD is not under. They do
not have to do a risk assessment even though they had $100
million run out the door?
Mr. Werfel. There is flexibility in the guidance, and we
have implemented that flexibility to target certain programs
that, even though they are designated for low risk, that we
require the agency to go back annually and we do not provide
them this type of ability to do the full-scope risk assessment
each year. And CDBG is one of those programs.
Senator Coburn. So it is not going to fly under the radar?
It is coming back in. It is going to be relooked at?
Mr. Werfel. Yes. Absolutely. And really what we need is a
partnership between OMB, GAO, and the inspectors general to
identify the CDBGs in the world, where there are questions
about that initial risk assessment.
Senator Coburn. Yes.
Mr. Werfel. If an agency made a good initial risk
assessment and then no environmental factors changed and the
IG, GAO, OMB, and Congress were all not seeing things that need
to be extra focused on, we are comfortable generally in
allowing the agency to move forward, and a full-scope risk
assessment every 3 years.
But programs like CDBG, where in partnership, we can
pinpoint and say I know you risk assessed it low, but it does
not add up when you look at other factors that we consider at
play; risk assess it again.
Senator Coburn. Yes.
Mr. Werfel. And that is what is going on with CDBG right
now.
Senator Coburn. Yes. But you would admit you could, under
the way you all do it, you could get low risk, but there could
still be fraud?
Mr. Werfel. Yes.
Senator Coburn. OK. So, for example, it is really important
that Congress do oversight; is it not? I mean, had somebody not
asked for this IG look, had we not had the Subcommittee look,
would we have found this? The real question is would we have
seen this $100 million going out the door had somebody not said
IG do a look at this and let us have a hearing on it.
And so, which is the point I try to make to my fellow
Senators all the time. The reason that we have as many problems
as we have is we are not doing enough oversight to look at to
see where the problems are; asking the right questions.
Let me go to one other area. I still have a little problem
with your risk assessment threshold, this 2.5 percent, and I
think that is going to be identified in what Senator Carper is
planning in terms of legislation, but is there not areas where
we are missing things when we have the threshold that you all
have designed, and I know we have been over this, but kind of
help me with that, if you would?
Mr. Werfel. Certainly. There is a couple of factors at
play. So, as I described, we have a current framework, where we
have this 2.5 percent and $10 million.
OMB's guidance goes beyond that and says if we know about a
program that has a low error rate, but high improper payment
dollars, then we are not going to let the agencies off the hook
for those programs.
So it is not an automatic exemption if you hit those two
categories. And the way the results have played out, back in
2004, under this framework, agencies were identifying $1.4
trillion in high risk. And that was at about 60 percent of all
outlays.
That was quite stunning in and of itself; that even with
this framework, you had $1.4 trillion being caught and saying
yes, this is a problem. This is high risk.
Since 2004, now we will flash forward to 2007, now we are
at $1.9 trillion, and what you see, as I had mentioned earlier,
DHS and the Department of Justice designated 12 programs high
risk. And other agencies are coming forward with additional
high risk programs.
We look at those numbers and those trends, and we say the
framework is working, because $1.4 trillion right off the bat
was quite impressive in terms of a net to cast, but since then,
and over time, the process is still generating more and more
looks. And I have to compliment the Government Accountability
Office, and when I talked about partnership, they were the ones
who shook their head at DHS and said something is not adding
up.
You are risk assessing these things as low. Go back again.
And that was all GAO.
Senator Coburn. Well, the one that comes to mind to me is
NASA. Do we really feel comfortable that NASA has no payment
problems? I mean, does anybody in the room want to stand up and
say NASA has no payment problems and, yet, that is what they
have reported? They have no high-risk programs? I mean, can we
really accept that with the amount of money they spend? There
is no fraud in contracting. There is no significant improper
payments made by NASA. Can we really say that and can we
believe it?
Do we believe it? I mean, does OMB believe it?
Mr. Werfel. No, we do not. But we would categorize NASA as,
in looking at NASA's expenditures, they are spending a
predominant amount of their money on contracts. So
distinguished from the earlier programs--food stamps, public
housing----
Senator Coburn. Yes.
Mr. Werfel [continuing]. The benefit payment world, which
we believe is that is the sweet spot for the IPIA, where NASA's
expenditures are it is in all the contracts that they expend
on, and that is really the Recovery Auditing Act.
And under the Recovery Auditing Act, NASA absolutely is
responsible under the threshold in the current bill, which is
$500 million a year in contract payment, they are absolutely on
the hook to be doing a thorough review and to be implementing
Recovery Auditing Act procedures, and the unfortunate thing
that occurred this year was that NASA did not get off the dime
quick enough and start up their Recovery Auditing Act process.
And it was too late by the end of the year to get the process
started, and so for 2007, they had a significant gap in their
reporting.
Believe me, that did not go undetected by OMB. We are very
concerned about that. We are putting a lot of focus with NASA
on getting back on track, and we anticipate that in 2009 we
will see a very thorough review of the contract dollars.
Senator Coburn. My time has expired. I just want to make
the last point, and then I will not ask a second round on this.
The President in his wisdom put in CFOs everywhere; right?
Everywhere. That is their job. Somebody ought to be hanging if
there was no recovery audit at NASA.
Senator Carper. Well, I do not know that it was the
President in his wisdom.
Senator Coburn. Somebody did.
Senator Carper. It might have been Senator Bill Roth, my
predecessor, who I think might have been the lead sponsor of
that in the Senate.
Senator Coburn. It happened. Let me just say that.
Senator Carper. A Congressman, one of his colleagues from
Delaware might have been working on it with him over in the
House. I do not know.
The President was at least smart enough to go along, and we
sort of worked together. One hand washes the other in this
stuff.
I want to come back, Mr. Williams. Let me just sort of
telegraph my pitch, so you will have a chance to think about
this, but I want to come back and ask you to give us some
thoughts on the recovery of some of these monies that have been
improperly paid. And just some things that we ought to be doing
that we are not doing well; some things that we can do better
on that front.
But while you think about that, let me just go back to Mr.
Werfel and ask you to return with me, if you will, to the
discussion we were having about benefit eligibility and that
sort of thing.
And apparently, there are a number of things that the
Administration has asked the Congress to do in this regard, and
it sounds like you are getting a little bit of help, but not as
much as you would like to have.
What are some things you all have been asking for that you
have gotten that we have done a decent job in supporting. What
are some things you are asking us to do where you have not
gotten the kind of support that you would like to have?
Mr. Werfel. Well, as I mentioned earlier, we are looking at
the data and trying to make smart strategic decisions about how
to tackle the $55 billion, and the nine programs, as I
mentioned, make up the $55 billion.
And so what we have asked agencies to do is to help us
figure out the root causes of error in those programs and what
kind of tools they need to be most effective in rooting out
error.
And what the President's budget does is it encapsulates and
OMB's Improper Payments Report encapsulates what we believe are
the critical tools that we do not have now.
Let me walk through some of them. The first, as I mentioned
in my opening remarks, are what we call cap adjustments, which
is not plain language and nobody outside the Beltway knows what
that means.
But what essentially it is is it is program integrity
dollars to do activities that we have looked at, and we said if
we spend this money, it is going to have a positive return on
investment for taxpayers. A dollar spent will return more than
a dollar in terms of error reduction and savings.
So we have asked agencies to explore--do you have things
that you could be doing that you are not doing today that would
have this type of return?
And the Social Security Administration, who is going to
testify today, is a best practice model agency at this. Their
return on investment analysis for the Supplemental Security
Income Program, which is one of the big nine programs, is based
on an actual past experience. It is very rigorous.
We have briefed many members of the Hill and staff on it,
and everyone has been impressed by the level of rigor in the
analysis. Some of those activities are upwards of one dollar
invested on an $11 return.
And what it is, in going back to that primary cause of
error in terms of eligibility, what Social Security needs to be
able to do that they are not doing today enough of are things
like continuing disability reviews and redeterminations,
because as people are receiving benefits, because they were
initially found eligible, they do not always stay eligible.
They get healthy. They get more money, whatever happens.
But if they stay on those rolls, those are improper
payments, and Social Security currently does not have the
funding that they need to do all the continuing disability
reviews and redeterminations to capture all that.
And the President's budget proposes a level of funding that
is going to get Social Security up and running to do those
things. And the result is for Social Security alone, you are
looking at approximately $2.6 billion in savings over 10 years.
Similarly, we have similar types of program integrity
funding requests for HHS, Health Care Fraud and Abuse; for IRS
Tax Enforcement; and for the Unemployment Insurance Program.
And that is where--and these requests have been in the
President's budget since 2003, and again, they seem to fall out
somewhere along the line during the appropriations process.
And what we have tried to do--the reason why it is called
cap adjusted is because we have tried to put a protected fence
around it so that it does not really impact spending limits or
what are known I guess as 302(b) allocations in the
appropriations process.
And if we can get that commitment from Congress up-front
that money is protected and is not going to be negotiated
around come appropriations time, that is the kind of thing we
are looking for, because again, it has that return on
investment.
We have additional legislative proposals beyond just these
activities. I mentioned one of them earlier, and that is
enhancing our third-party data sources in the UI Program,
Unemployment Insurance. We want to be able to know immediately
or as soon as possible when people are going back to work so we
can stop those unemployment checks from going forward.
So we have a legislative reform to do that. That, if we can
get that one going, is $3.6 billion over 10 years. The Earned
Income Tax Credit----
Senator Carper. How much over 10 years was the last one?
Mr. Werfel. The Unemployment Insurance?
Senator Carper. The last one. Three point----
Mr. Werfel. $3.6 billion over 10 years.
Senator Carper. Over 10 years; right. Give us some idea,
Mr. Werfel. That is how much? Is that a net number or is that
costs after investment?
Mr. Werfel. No, there is no up-front. To distinguish it
from the program integrity cap adjustments, those required up-
front investment of dollars. They just have a return on
investment.
The reforms that I am going to go through now, and I will
try to do it quickly, are no up-front investment. It is just a
change to the law. It is creating a new data element and
database. It is changing the way the eligibility formula works,
sort of simplify it, different approaches like that--tools to
give to the agencies. No additional funding.
Senator Carper. Would you describe this as low-hanging
fruit?
Mr. Werfel. I would definitely describe it as low-hanging
fruit. It is our first major cut at what we think we need to do
to impact the $55 billion in a big way.
Senator Carper. Why do you suppose the Congress has not
picked up on it? I guess it is the appropriators? It sounds
like it is the appropriators. Why do you suppose we have not
picked up on it to date?
Mr. Werfel. I think we have gotten--with respect, the
appropriators certainly are the responsible authority for the
cap adjustments, and we have done a lot of work with the staff
up there, and have had briefings, and really pushed it and
tried to make it a significant priority.
It seems to fall out at the end. It seems to not survive
those last-minute negotiations on things like the Omnibus.
So, for example, last year's budget resolution, it was in
there, and we were doing a celebration back at OMB, because we
figured if it was in the budget resolution, it was a pretty
good chance that it was going to be in the final appropriations
bill. But again, the way the appropriations process played out
this year, always is a unique and challenging situation and it
fell out at the end.
So I think there is interest. I think it is just we have
not been able to get across the end zone line so to speak.
Senator Carper. Yes. Well, the President will be submitting
his budget I guess in a couple of weeks? Sometime in April or
so I expect that Congress will try to grapple and come up with
a budget resolution. It sounds like that we included in the
budget resolution roughly 8, 9, 10 months ago for 2008, these
initiatives, the authorization, the expectation that we do
this, and then when the actual money has maybe been
appropriated, we did not follow through?
Mr. Werfel. That is correct. It did not----
Senator Carper. Is that right?
Mr. Werfel [continuing]. Make it into the final bill.
Senator Carper. I would just say to my friend, Dr. Coburn,
we may have a great opportunity here to follow up.
Senator Coburn. I like amending the Appropriations Bill.
Senator Carper. I know it is something that is hard for you
to do, but all right.
Well, that is real helpful. Let me go back to Dr. Coburn. I
know you said you did not have anymore questions for this
panel. Anything else, because I want to ask Mr. Williams a
couple of questions.
Senator Coburn. Actually, I have some questions, but I will
submit them because of our time.
Senator Carper. OK.
Senator Coburn. And I have a Judiciary hearing starting at
4 p.m.
Senator Carper. OK. I understand Senator Levin is on his
way, and he would like to ask a couple of questions. I think
his quote was I would want to grill these two witnesses. Do not
let them get out of the room.
No, he did not say that, but it gives me the chance to ask
Mr. Williams to visit with us again this issue of recovery and
somewhere in my prepared questions I have a question on this,
and if I have enough time, I will dig into it.
But what are we doing well on recovery and what are we not
doing well on recovery?
Mr. Williams. Well, Mr. Chairman, if you remember, the
first year that I testified and talked about recovery auditing,
the numbers were very small relative to the amount of
contracting activity in the Federal Government.
Over the years, while the number is down this year, we have
seen the amount identified and actually recovered to be going
up this year with the point that we make about money that is
automatically returned has been excluded in the DOD component
of the number.
Senator Carper. Explain that change in DOD. Just explain
that to me. I do not understand.
Mr. Williams. Basically, if I am a contractor and you owed
me $10, you paid me $20, and I returned the $10 to you before
being asked, just voluntarily returned that $10 to you, then it
is not reported as being recovered is the difference according
to my understanding.
Senator Carper. OK. God bless those contractors, those
defense people.
Mr. Williams. And may I add to that is that even though it
might not be reported as a component under the Recovery Audit
Act, there was still an improper payment made in that case. In
GAO's views amounts collected and identified under the Recovery
Auditing Act, they are improper payments also.
You asked for some general thoughts about the program and
basically if you have got a recovery auditing program and if it
is free, then my statement to that is let us implement it
everywhere. It is not going to be free. There are some costs
associated with setting up the program, etc. But we believe
that it should be utilized to the greatest extent possible, and
it should follow the concept that was mentioned earlier during
the discussion, and that is you need to look at it from a cost
benefit standpoint.
And as I have always stated before this Subcommittee with
regards to this particular issue is that you should never spend
a dollar and one cent to collect a dollar. So it should be cost
effective.
So those are a few thoughts that I have on the program.
Senator Carper. All right.
Senator Coburn. I have a question.
Senator Carper. Go right ahead, please.
Senator Coburn. What happens, if anything, for an agency
that does not comply with the law or OMB guidance right now on
improper payments?
Mr. Werfel. Currently, there are two particular
implications that come to mind. First, the independent auditor
would include in the audit report a finding of indicating non-
compliance with that particular law or regulation.
And second, the impact from an OMB standpoint is we would
downgrade their score in the President's Management Agenda----
Senator Coburn. All right.
Mr. Werfel [continuing]. And make that public.
Senator Coburn. OK. All right. Thank you.
Senator Carper. We have been joined by Senator Levin, and
we are glad to recognize you at this time. Thanks for joining
us.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you, Mr. Chairman. Let me add my
welcome to our witnesses. Many of the overpayments that were
targeted in the GAO report involved payments of relatively
small amounts to individuals such as payments for school
lunches, Social Security checks, and payments under the Earned
Income Tax Credit Program. And that is well and good.
But there is another whole category of improper payments
involving hundreds of millions of taxpayer dollars that receive
very little attention, and those are the overpayments, double
payments, and other type of mistaken payments that are made by
Federal agencies using taxpayer dollars to vendors and
contractors.
Those type of payments happen all the time, but the
information on the extent of that problem and what is being
done to recover those payments that do not receive as much
attention in the GAO report or the OMB testimony is
apparently--and I am sorry I missed it--for instance, take a
look at Appendix II of the GAO's prepared statement, item four,
involving the Department of Defense.\1\
---------------------------------------------------------------------------
\1\ The chart referred to by Senator Levin appears in Appendix II
of GAO's prepared statement that appears in the Appendix on page 81.
---------------------------------------------------------------------------
The chart shows that in 2006, the DOD identified $550
million in improper payments under the category of commercial
pay, which means payments made to vendors or contractors.
So that is half a billion dollars in improper payments. In
2007, however, the figure disappears. And the category for
commercial payments shows zero and my staff has been told that
the Department of Defense did not report any figure in 2007 for
this category because at least as a possibility the Department
was advised that vendor and contractor payments are not covered
by the Improper Payments Information Act.
Now, that is not my understanding of the Act, and I am just
wondering, GAO, what is your interpretation of the Improper
Payments Information Act? Should Federal agencies be reporting
improper payments to vendors and contractors as well as
improper payments to employees or program beneficiaries?
Mr. Williams. Senator Levin, as I stated just before you
came in, it is GAO's opinion that those categories of
activities that you just described, we call those improper
payments also, and they should be included under the
requirements of IPIA.
Senator Levin. All right. Now, if this territory has been
covered, I am not going to repeat it.
Senator Coburn. Go ahead. We covered it on recovery audits,
but we did not talk about it at this point.
Senator Levin. OK. All right.
Now, why did the Department of Defense decide to stop
reporting a category of improper payments last year, which was
about half a billion dollars? Mr. Werfel, do you know?
Mr. Werfel. Well, I think that we might have a numbers
question here, but let me tell you what I do know, and that is
that under the Improper Payments Information Act, which came
out and was enacted about the same time as the Recovery Audit
Act. The Improper Payments bill requires agencies to do an
estimate of their improper payments, and we interpret that to
go out and pull a sample of payments and then extrapolate that
sample to a universe and say what your payment error is;
whereas the Recovery Auditing Act requires more of a targeted
review--every risk payment and figure out whether their errors
were.
And we look at that and say that makes sense to us.
For contracts, where have that type of control and direct
knowledge of the specific things going on with those payments,
we should be doing more universal look at every payment versus
a Social Security or a food stamp situation where sampling
makes more sense.
Senator Levin. Was that interpretation in effect in 2006?
Mr. Werfel. It has been in effect, from OMB's standpoint
and the way we have structured our guidance, since Fiscal Year
2004.
Senator Levin. So that there was zero in 2007 and half a
billion in 2006?
Mr. Werfel. According to, again, and I hope we do not have
a numbers problem here, but according to my data that I have
from the Defense Department, they subjected under Recovery
Auditing Act $189 billion----
Senator Levin. No, I am talking about the Improper Payments
Information Act. It was half a billion dollars in 2006 and zero
in 2007; is that correct?
Mr. Werfel. I am not aware of that. My information
indicates that the Department of Defense did, in fact, report
improper payments in their non-contract payments, such as
military health and military pay, in Fiscal Year 2007, and I
can get you those numbers.
Senator Levin. No, that is not what I am referring to,
though. I am talking about vendor and contractor payments.
According to my staff, in 2006 there was $550 million in
improper payments under that category in 2006 and zero in 2007;
is that what your data showed?
Mr. Werfel. I do not have that information.
Senator Levin. Well, let's find out from Mr. Williams.
Mr. Werfel. Yes.
Mr. Williams. Senator Levin, that is the information that
we have pulled from the PAR Report, and I am just asking the
staff right now if we can bring that up here, so we can take--
--
Senator Levin. All right. Assuming that my staff is right,
and they have got a thousand percent----
Mr. Williams. OK.
Senator Levin [continuing]. Except when they do not,
assuming that is true, what is the explanation, Mr. Werfel?
Mr. Werfel. Well I would say, first of all, that I would
hope that OMB in putting together our report that was issued
today would pick on an outlier like that.
Our approach has been, and we have asked agencies to comply
with, that for benefit and individual payments that they report
under the Improper Payments Information Act and for vendor
payments they report under Recovery Auditing. And for both----
Senator Levin. But you said that was true in 2006, too?
Mr. Werfel. It has been true since Fiscal Year 2004.
Senator Levin. OK. Take a look at page 28 if you would then
of this report?
Mr. Werfel. I will.
Senator Levin. I am sorry--the GAO testimony.
Senator Coburn. Can I interject here for a second?
Senator Levin. Of course.
Senator Coburn. The guidance that OMB gives is 2.5 percent
or $10 million. Well, $500 million is two-tenths of a percent.
Therefore, they do not have to report, which is nuts.
Senator Levin. It is not only nuts. It is inconsistent.
Senator Coburn. Well, the footnote for that zero says that
the Defense Department did not report.
Senator Levin. Yes, but my question is why. What changed?
Senator Coburn. I suspect it is because they do not fall
under the 2.5 percent or $10 million rule.
Senator Levin. But did they not fall under the same thing
in 2006?
Senator Coburn. Well, but once--again it is the 2.5 percent
because it is such a small percentage even though it is $500
million, they have 2 years--they are not required under the----
We covered this before you came in.
Senator Levin. OK.
Senator Coburn. Under the interpretation, OMB's guidance to
them. I don't know if that is right or not.
Senator Levin. No, I think I got it, but that may explain
zero in 2007 that it is wrong guidance I think--I will not
speak for anyone else in terms of the purpose of the Act. But
that is not my question. My question is the same guidance you
said was in effect in 2006?
Mr. Werfel. Yes, and I need to--I think I am going to ask
you to indulge me and let me get back to you on that, because I
do not have that information at my fingertips in terms of why
that number appeared in 2006 and did not in 2007.
Senator Levin. Right. And I understand what Senator Coburn
is saying, and that is not an acceptable----
Senator Coburn. It is not an acceptable----
Senator Levin [continuing]. Interpretation for me, either,
and I will not speak for our Chairman, but I agree with that.
That is not acceptable, but it also seems to be a change in
guidance of some kind between those 2 years, and I want to know
if that is true, and, if not, what explains the zero. That is
my question for the record. Thank you. And thank you for
letting me buzz in this way.
Senator Carper. No, not at all. Just before you arrived, we
were in some back and forth with Mr. Werfel. He had mentioned
in his testimony that the Administration has asked the Congress
to do a number of things through appropriations legislation and
others to enable us to reduce improper payments and do a better
job on recovery.
And it sounds to Senator Coburn and me as if we may have,
we the Congress, may have used some of those initiatives in our
budget resolution for pay fors, to reduce outlays over 5 years,
over 10 years, to enable us to pay for other things.
But then, when it came time to actually do the
appropriation, to follow up and make those pay fors possible,
we may not have done that. And that is I think--that is fertile
ground for us to work together and work with the Administration
to make sure if that is indeed what happened, that we do not
make that mistake again.
Senator Levin. Thank you, both.
Senator Carper. Yes. Good to see you. Thanks so much for
joining us. I have got a couple more questions for the record,
Mr. Williams----
Mr. Williams. OK.
Senator Carper [continuing]. And Mr. Werfel. Anything else,
Dr. Coburn? All right. Gentlemen, again we appreciate your
being back with us today. Mr. Williams, I understand you can
stay a bit longer for the second panel. If you could do that,
we would be most appreciative.
Mr. Williams. OK.
Senator Carper. But thank you so much.
Mr. Williams. Thank you.
Mr. Werfel. Thank you.
Senator Coburn. While you all are being seated, I have to
go to a Judiciary Committee mark up.
I just wanted to express my appreciation for the work that
you do. It is often not appreciated. The importance of it is
often not recognized. This Subcommittee recognizes it, and
although I will not be here to hear your testimony or ask
questions I wanted you to know how much I appreciate it, and I
think I am speaking for Senator Carper as well--the fine work
that you do. And we have noticed progress in the last 3 years.
I think you all have as well, and I think that should be noted.
Thank you.
Senator Carper. Dr. Coburn, keep them straight on that
Judiciary Committee.
Mr. Coburn. I will do my best.
Senator Carper. I know you will. Well, let me take a moment
here to introduce our second panel. The first we have Charles
Christopherson, Chief Financial Officer and Chief Information
Officer of the U.S. Department of Agriculture. Who is the
Secretary of Agriculture now?
Mr. Christopherson. The Secretary is now Ed Schafer.
Senator Carper. How is he doing?
Mr. Christopherson. He is doing wonderful.
Senator Carper. Not bad for an old governor, huh? Give him
my best.
Mr. Christopherson. Great for a governor. He is a great
guy.
Senator Carper. Good. Well, we had a couple of governors
there.
Mr. Christopherson. We have.
Senator Carper. Yes. Prior to your confirmation by the
Senate in 2005, you were a co-founder of a consulting firm that
specializes in company turnarounds and cash management, and you
hold an MBA from Oregon Executive MBA Program, and you are also
a CPA. Welcome.
Next is Anthony Dale, Managing Director of the Federal
Communications Commission and he has served in that position I
am told for about 2 years?
Mr. Dale. Yes, sir.
Senator Carper. All right. In that position, we are told
you are responsible for the agency's operations and management
functions, including the FCC's financial and accounting
activities and that you worked at the FCC in a variety of
management and staff attorney positions for about a decade?
Mr. Dale. Yes, sir.
Senator Carper. Charlie Johnson is the Assistant Secretary
and Chief Financial Officer for Resources and Technology at the
U.S. Department of Health and Human Services.
Mr. Johnson previously served as a CFO of APA. He was also
previously the president of the Huntsman Cancer Foundation and
served as a member and as chair of the Utah State Board of
Regents, which oversees all public institutions of higher
education in the State.
He was also a chief of staff to the Governor of Utah. Which
governor?
Mr. Johnson. Governor Leavitt, now Secretary Leavitt.
Senator Carper. I have heard that name. I was with him on
Monday night, though for the state of the States. Always good
to see him. Served as chief of staff to Governor Mike Leavitt
and served as Director of the Governor's Office of Planning and
Budget for 2 years. In total, Mr. Johnson has spent 31 years in
the practice of public accounting, having started at the age of
14.
Mr. Johnson. Exactly.
Senator Carper. Finally, we have David Rust, the Acting
Deputy Commissioner for Disability and Income Security Programs
at the Social Security Administration, and formerly the
Executive Secretary of the Social Security Administration.
When were you the Executive Secretary, Mr. Rust?
Mr. Rust. Actually, I still am.
Senator Carper. OK. But you are not former. You are
currently?
Mr. Rust. Correct.
Senator Carper. All right. Mr. Rust has previously held a
number of leadership positions in the Federal Government,
including the Department of Health and Human Service and the
Department of Agriculture. Who was the Secretary when you were
at Agriculture?
Mr. Rust. Several of them. Secretary Espy, Secretary--get
two or three of them in there.
Senator Carper. OK. I am going to invite you all to proceed
with your testimony, and, Mr. Christopherson, since I
introduced you first, we will ask you to go first.
Your whole statement will be made a part of the record, and
you can summarize as you see fit.
STATEMENT OF THE HON. CHARLES R. CHRISTOPHERSON, JR.,\1\ CHIEF
FINANCIAL OFFICER, U.S. DEPARTMENT OF AGRICULTURE
Mr. Christopherson. Thank you, Mr. Chairman. Mr. Chairman
and Ranking Member Coburn, and Members of the Subcommittee,
thank you for your invitation to appear before you today to
provide the Subcommittee with the status of the U.S. Department
of Agriculture's progress on the President's goal to eliminate
improper payments.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Christopherson appears in the
Appendix on page 88.
---------------------------------------------------------------------------
I am Charles Christopherson, the Chief Financial Officer
and Chief Information Officer at the USDA. And my role as the
Chief Financial Officer is to lead the Department's efforts in
eliminating improper payments.
At USDA, we believe that eliminating improper payments is
not only important but it is essential. The Department
obligates about $100 billion of taxpayer's money annually
through more than 300 programs worldwide.
Many of USDA programs operate through an extensive network
of Federal, State, and local cooperators. We have a complex
tapestry of systems. Many date back to the 1970s and 1980s.
These old systems often require our employees to complete
manual reviews of qualifying paperwork for USDA programs.
While we still face many challenges, USDA has made progress
in identifying programs that are susceptible to significant
improper payments.
In Fiscal Year 2006, we increased the number of programs
measured and we clarified the measurement and reporting
criteria for improper payments. Then in Fiscal Year 2007, USDA
achieved a major milestone by measuring all programs with
significant risks for improper payments.
This includes 16 programs with total outlays of over $72
billion. The measurement of these programs estimated that for
Fiscal Year 2007 improper payments totaled $4.4 billion, an
error rate of 6.1 percent. This is a decrease from Fiscal Year
2006 with improper payments of $4.6 billion and an error rate
of 7 percent.
I believe it is important to note that this reduction
occurred even though two additional nutrition assistance
programs were measured and reported for the first time in
Fiscal Year 2007.
In Fiscal Year 2006, we were transparent with both the
Congress and our employees on the improper payment rates in the
Farm Service Agency. This transparency, along with dedication
of FSA's employees, helped us to decrease the rate of improper
payments in their seven high risk areas in Fiscal Year 2007.
This progress was made through reinforcement of
administrative procedures, implementation of checklists, and
the implementation of data matching process with the Social
Security Administration's Death Master File.
In Fiscal Year 2007, USDA's Food and Nutrition Service
measured for the first time the National School Lunch Program
and the School Breakfast Program. The estimated amounts of
improper payments, including under and overpayments for the
School Lunch Program, were $1.4 billion, an error rate of 16.3
percent. The estimated amount of improper payments, including
under and overpayments for Breakfast, were $520 million and an
error rate of 24.9 percent.
FNS has worked closely with OMB, Congress, the States,
schools and advocacy group for two decades to better understand
the improper payments in the Food Assistance Programs and to
find ways to reduce them.
In an effort to reduce the number of improper payments, FNS
has developed and requires annual training for schools on
certification and accountability issues. FNS employees provide
technical assistance to States and to schools to help: First,
reduce the payments of the administrative errors; second,
improve program integrity; third, improve compliance with
program nutrition; fourth, improve compliance with menu
planning standards; and, last, increase the accuracy of meal
counts.
Through this same type of proactive partnership, FNS has
seen improvements in food stamp program error rates that bring
it to 5.99 percent. This improved performance reflects the
effective partnerships with States administering--or the State
administering agencies. Twenty-five States now have an error--
or have payment accuracy rate greater than 94 percent.
USDA agencies often work together to reduce improper
payments. The Natural Resources Conservation Service, the Farm
Service Agency, Rural Development, and the Agricultural
Marketing Service staffs meet monthly to discuss and resolve
overlapping issues.
The result of this interagency communication and the
program integration has reduced improper payments related to
the conservation easements and farm subsidies.
We also continue to improve our processes and systems. As
an example, the Department is currently in the midst of
implementing a paperless invoice tracking and processing system
that will improve the accuracy and efficiency, and thus
reducing the risk of making improper payments.
Prompt pay interest should be dramatically reduced when
this system is fully implemented.
In closing, I would like to thank the Subcommittee for this
opportunity to share the status and progress of USDA on this
important subject. We feel that in this last couple of years
that we have seen some very dramatic changes at USDA as we have
included additional programs and as we have also adjusted our
guidance as a management team at USDA. So thank you, sir.
Senator Carper. Thank you, Mr. Christopherson, and I look
forward to coming back and asking you a couple of questions.
Mr. Dale, you are recognized.
STATEMENT OF ANTHONY J. DALE,\1\ MANAGING DIRECTOR, FEDERAL
COMMUNICATIONS COMMISSION
Mr. Dale. Good afternoon, Mr. Chairman. Thank you for the
opportunity to appear before you today.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Dale appears in the Appendix on
page 96.
---------------------------------------------------------------------------
In November 2007, the FCC reported for the first time an
estimate of improper payments affecting one of our programs,
the Universal Service Fund. This afternoon, I will provide a
summary of the steps we have taken to assess, measure, and
address improper payments.
The Universal Service Fund (USF) helps to ensure access to
telecommunications services for consumers in high cost and
rural areas, and promotes access to advanced services for
schools, libraries, and health care service providers in rural
areas.
It consists of four programs: The High Cost Program, the
Schools and Libraries Program, the Low-Income Program, and the
Rural Health Care Program. The total annual size of the program
is about $7 billion a year.
The Fund is administered by a non-profit corporation, the
Universal Service Administrative Company, that receives and
reviews applications for benefits, disburses funds to
beneficiaries, and collects funds from service providers, and
performs certain oversight functions under the oversight of the
Inspector General.
In March 2004, the Commission performed a risk assessment
and concluded that two USF programs, the High Cost Program and
the Schools and Libraries Program, were at risk for improper
payments.
To estimate improper payments, the Commission relied on the
expert audit oversight of the Inspector General.
The Inspector General oversaw the completion of a
statistically valid sample of audits of program beneficiaries
and contributors. The IG's audits examined more than $825
million in disbursements and more than $450 million in
contributions. This was the largest, most comprehensive
examination of Universal Service Fund beneficiaries and
contributors done to date.
The Inspector General concluded that, in general, the
audits indicated compliance with the Commission's rules,
although erroneous payment rates exceeded 9 percent in most USF
programs.
The specific erroneous payment rates the IG identified
were: 16.6 for the High Cost Program, 12.9 percent for the
Schools and Libraries Program, 9.5 percent for the Low Income
Program, 20.6 percent for the Rural Health Care Program, and
5.5 percent for Contributor payments.
The IG reported that improper payments to USF beneficiaries
could be more than $900 million and incorrect payments from USF
contributors could be more than $350 million.
The Inspector General plans to significantly expand the
audit program in order to provide a more precise estimate of
the error rate.
We expect that these upcoming audits would be used to
determine the baseline of improper payments in the program. The
IG identified several causes for improper payments, including
inadequate document retention, inadequate accounting systems,
weak internal controls, a lack of compliance with Commission
rules, problems with the application review process, incorrect
interpretation of program rules, data entry errors, and
inadequate supervision of consultants.
We are concerned about the error rates the Inspector
General identified. Our primary goal is to safeguard the
Universal Service Fund so as to ensure the program works as
Congress intended.
We are working hard to address the problem identified by
the Inspector General.
First, we are working to recover any improperly disbursed
funds. After the IG released his initial analysis of the audit
results, we instructed the non-profit administrator to start
recovering funds, and this process is currently underway.
Second, the Commission adopted rules that address many of
the IG's problems that he had identified in the audits.
The Commission's new rules establish tighter document
retention requirements, provide for a uniform standard for
recovering improperly disbursed funds, provide for better
oversight of the administrator, and provide stricter penalties
for contributors who fail to make timely payments.
In addition, the Commission's new rules also allow the
Commission to debar any party from continuing to participate in
the program if they had defrauded any of the programs.
Third, we directed the administrator to carefully review
the IG's audit results and recommend additional steps the
administrator should take to prevent and reduce potential
improper payments.
We also directed the administrator to identify any
additional resources that may be needed to further safeguard
the Fund. We are currently reviewing the administrator's
reports to determine what additional actions may be required.
Fourth, the Commission tightened oversight of the
administrator by establishing a Memorandum of Understanding to
ensure the administrator performs its functions in an
efficient, effective manner.
Fifth, program participants that violated the FCC's rules
could be subjected to potential enforcement action.
And finally, we sought $21.38 million of additional funding
for the Inspector General to enhance oversight of the Universal
Service Fund. We recently received authorization for this
funding level, and the IG is ramping up his oversight
accordingly.
Thank you for this opportunity to report on the
Commission's efforts in this area. I will be happy to answer
any questions you may have.
Senator Carper. Good. And I will have some. Thank you very
much for that statement. Mr. Johnson, Governor Johnson.
STATEMENT OF CHARLES E. JOHNSON,\1\ ASSISTANT SECRETARY FOR
RESOURCES AND TECHNOLOGY AND CHIEF FINANCIAL OFFICER, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. Johnson. Thank you. Thank you, Chairman Carper, for
your leadership, along with Dr. Coburn. It is very important to
have that kind of leadership over this program.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Johnson appears in the Appendix
on page 102.
---------------------------------------------------------------------------
I would like to start with some good news. For the very
first time----
Senator Carper. Let us go to the next witness. We do not
have time for that good news, Mr. Johnson. Well, in your case,
we will make an exception.
Mr. Johnson. OK. We have had a winding road, a stop and
start, but for the first time for 2008, we will report on all
seven of our high-risk programs. So you will have numbers on
all seven.
It has been a long time coming.
Senator Carper. So that is for 2008?
Mr. Johnson. Yes. We will report for----
Senator Carper. All right. For 2007, how many of the high-
risk programs did you have?
Mr. Johnson. Well, we had three and then partials on
others. And so we will have the full national error rates for
2008.
Senator Carper. My guy Leavitt is pretty good, yes?
Mr. Johnson. Yes.
Senator Carper. We should keep him on.
Mr. Johnson. I think we should.
Senator Carper. All right. Maybe we should keep you on.
Thanks. Go ahead. Thanks for the good news.
Mr. Johnson. Further good news is that for those mature
programs, that is, Medicare, Head Start, and Foster Care, we
have shown that the rates have dropped considerably since 2004.
Senator Carper. Just explain those charts, if you will.\1\
---------------------------------------------------------------------------
\1\ The charts referred to appear at the end of the prepared
statement of Mr. Johnson and appears in the Appendix on page 118.
---------------------------------------------------------------------------
Mr. Johnson. OK. On the far left, it is Medicare and it
shows the rate in 2004 around 10 percent and then a drop to
around 4 percent for the current year. That is Medicare. On
Foster Care, about the same, a little over 10 percent and drop
below 4 percent. And then on Head Start, it was about 4
percent, down to something less than 2 percent.
So that is the mature programs. And so I wanted to start
with that good news and also that our recoveries are up, and I
will get to that later.
Senator Carper. All right.
Mr. Johnson. But for the first time then this year, we
reported a partial disclosure of our Medicaid rate. That will
be rather startling, an 18.5 percent error rate, which, as you
indicated, translates to $13 billion, and if you add the State
share, it is $22 billion.
Now, that number will go down because most of it was with
the documentation. If you put that other chart up? I would like
to just compare that so--yes, the third chart, please.
I would like to compare it because it reflects where we
were with documentation when we started with Medicare in 2004.
And you can see that the blue----
Senator Carper. Just explain them for us.
Mr. Johnson. Yes.
Senator Carper. They are a little hard to see from this
distance.
Mr. Johnson. Yes. I am just going to give you----
Senator Carper. I can tell they are charts. I can tell
that.
Mr. Johnson. Good. And that is blue, and that shows 70
percent in Medicare, which would be the documentation error
rates.
For Medicaid, it is 82 percent. So we start very high with
documentation errors, and then we work it down. And so as you
get the documentation in, then you start to find more errors in
the things you really care about--medically necessary, coding
errors, and that sort of thing.
So, I think we are basically on the right track.
Our four other programs depend almost entirely on
eligibility, and eligibility is really where you get
recoveries. If you have a person that is eligible, they are
entitled to all of the benefits and ought to be. If you have
someone that is not, they ought to be cut off. And it is pretty
black and white in eligibility.
In general, we have eligibility on individuals or we have
it on providers. And so we are working that eligibility side
very hard.
But this is all about results. I mean, it is fine to
measure error rates and it is fine to get percentages, but a
statistical sample is taken and then applied to the whole. But
you cannot recover from a statistical sample. You can only
recover from a case-by-case one at a time, find out who is a
violator, who is not.
And so we use some of the things that Mr. Werfel talked
about--the data matching systems, public assistance data
matching systems between us and various Federal agencies and
State agencies.
We use the National Directory of hires. Just a couple
examples, if I may.
In New York, by using the public assistance databases,
since--from 2003 to 2007, they removed 26,000 individuals from
the active rolls at a savings of $192 million. Now,
Pennsylvania, 7 years, 13,000 removed, a savings of $73
million. On the National Directory of hires, we have about 82
percent of our States that are now using that--82 percent of
the TANF covered population.
So we are making good progress there.
The other big thing that happened this year was our
recovery audit contracts on Medicare. We had three pilot
States. We gave them $239 billion in claims. That is billion
dollars in claims. So you can see the size of our program. They
recovered----
Senator Carper. Say that again? You gave them how much in
claims?
Mr. Johnson. We gave them in claims to examine $239 billion
between three States. And they have recovered to date on that
mass, $432 million. So we are starting to generate some genuine
money.
That program is not without some controversy, but we have
been working with Congress and others, and we are going to
expand it to all 50 States, because it has proven to be a very
lucrative source of recoveries.
Senator Carper. And the monies that are recovered, what do
we do with these? What do you all do with those?
Mr. Johnson. Well, that is an interesting thing. First,
these are contingency-based contracts, so the contractor does
get a piece of the recoveries. And then the remainder goes to
Treasury or into the Trust Funds, depending on the nature of
it.
Senator Carper. All right. Thank you.
Mr. Johnson. On our fraud and abuse efforts, that is, as
has been pointed out from Dr. Coburn, we have had over $12
billion in 10 years on that portion of it. And then our
Medicaid Integrity Program is $13 for every $1 spent. The last
number I saw it was something like a recovery of $82 billion.
Senator Carper. You mentioned that you have been working
with contractors in three States for Medicare recovery?
Mr. Johnson. Right.
Senator Carper. And you hope to extend that to the other 47
States?
Mr. Johnson. Correct.
Senator Carper. I saw somewhere in testimony I thought you
might be able to do that by Fiscal Year 2010? Is that correct?
Mr. Johnson. We are moving onto it this year. I do not know
how quickly we will get all States onto it, but we are moving
very rapidly. We have had a lot of negotiations to take the
pilot program and adapt it to something that is more acceptable
to both the Congress and the States.
I cannot tell you exactly the timeline, but we are
expanding it to all 50 States.
Senator Carper. Could you let me know that for the record?
Mr. Johnson. Yes, we will get to you.
Senator Carper. If somebody would just let me know for the
record. Thanks very much.
Mr. Johnson. Yes. Finally, I would like to talk about this
resources issue and the ability to sustain these programs on
recovery.
I mentioned if you have a recovery audit, and you give a
contractor a percent of their findings, that is covered.
But we had on our fraud and abuse, we had $383 million in
the Senate past appropriations bill; in the Omnibus bill, zero.
We had about $6.2 million for TANF, Foster Care, and Child Care
in the bill. When we received the Omnibus back, zero. And so
these numbers are being stripped out at the end, as Congress
finally passes these bills. So we could use a little help in
that area.
Senator Carper. Great. Could I just ask you to be a squeaky
wheel on that point, will you?
Mr. Johnson. Well, we will, and we will continue.
Senator Carper. Be real squeaky.
Mr. Johnson. And Secretary Leavitt talks about this a lot.
Senator Carper. Good. Well, make sure he talks some more to
me, too. Thanks.
Mr. Johnson. Thank you.
Senator Carper. All right. Thank you, sir. Mr. Rust.
STATEMENT OF DAVID RUST,\1\ ACTING DEPUTY COMMISSIONER FOR
DISABILITY AND INCOME SECURITY PROGRAMS, U.S. SOCIAL SECURITY
ADMINISTRATION
Mr. Rust. Mr. Chairman, before I begin, my aging memory has
recovered and the five Secretaries I worked for were Madigan,
Espy, Glickman, Veneman, and Johanns. So it was a long run over
there.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Rust appears in the Appendix on
page 121.
---------------------------------------------------------------------------
Senator Carper. Some pretty good names there.
Mr. Rust. I would also like to just take a second before I
begin to thank Mr. Werfel for his kind remarks about Social
Security Administration's (SSA's) attempts to address the
improper payments issue.
Senator Carper. I do not think he is still here. Is he? OK.
Do you hear that?
Mr. Werfel. You are welcome.
Senator Carper. A shout out for you, Mr. Werfel. There you
go. We don't get those everyday.
Mr. Rust. Thank you for the opportunity to discuss several
of the efforts that the Social Security Administration is
undertaking to strengthen and maintain the integrity of its
programs.
As you said in the introduction, I am David Rust. I am
currently the Executive Secretary of the Agency and since
August I have been the Acting Deputy Commissioner for
Disability and Income Security Programs. My responsibilities
include oversight and coordination of policy and operations for
a wide range of programmatic issues for the Old Age and
Survivors Insurance (OASI), Disability Insurance (DI), and
Supplemental Security Income (SSI) Programs.
I would like to just make an aside and say that both
Commissioner Astrue and I were saddened to learn of the death
of former Social Security Commissioner Robert Ball this week.
He left an indelible mark on the Social Security
Administration, and his programs and his leadership will be
long remembered.
Senator Carper. Wait. He died this week? Do you know?
Mr. Rust. Yes, he did, sir.
Senator Carper. Oh, he was a giant, was he not?
Mr. Rust. A giant and at the age of 93.
Senator Carper. I came to the Congress in January 1983, and
we were grappling at the time with the Social Security Trust
Fund. It was about to go under, and my recollection is the
Commission that was chaired by Alan Greenspan included a bunch
of people, among them Senators Dole and Moynihan and
Congressman Pepper, and others. My recollection was that Mr.
Ball was a big part of that.
Mr. Rust. And he remained active well until his recent
illness on issues related to social insurance. So he was a
towering figure at Social Security, our longest serving
Commissioner, as a matter of fact.
I would like to take this opportunity to thank the Members
of the Subcommittee for your support on behalf of SSA in the
appropriations process. The $148 million appropriated above the
President's request will make a real difference in our ability
to meet the needs of the American people.
Last year, the Social Security Administration paid $576
billion in retirement, survivor, and disability benefits to
nearly 50 million Social Security beneficiaries and nearly $40
billion to 7.3 million Supplemental Security Income
beneficiaries.
Our beneficiary rolls continue to grow. However, it is
important to note that while our workloads are increasing with
the benefit population, our resources have been dwindling. We
have had to reduce some of our stewardship activities in order
to devote necessary resources to basic service delivery, and
our payment accuracy has suffered as a result.
Let me give you an example: In Fiscal Year 2006, our
payment accuracy with respect to overpayments in the
Supplemental Security Income Program was 92.1 percent, a
significant decline from the Fiscal Year 2005 rate of 93.6
percent.
We directly attribute the decrease to the reduction in the
number of Supplemental Security Income redeterminations that we
were able to conduct. The redeterminations are periodic reviews
of non-medical SSI eligibility requirements.
In Fiscal Year 2004, we processed over 2.2 million
redeterminations. In Fiscal Year 2005, that number dropped to
1.7 million, and in Fiscal Year 2006 and Fiscal Year 2007, we
conducted just over 1 million of redeterminations.
We would like to explain that these and other program
integrity issues also need additional resources. The
President's Fiscal Year 2009 budget includes a proposal similar
to the one submitted last year for Congress to provide SSA with
funding outside the spending caps in the budget, specifically
for program integrity activities.
This funding would support additional SSI redeterminations
and the continuing disability reviews (CDRs), our most
important tools in maintaining and improving program
stewardship.
CDRs are periodic reviews of the medical eligibility for
SSI and disability benefits. CDRs are estimated to save about
10 program dollars for every dollar spent conducting them,
while the additional SSI redeterminations are estimated to save
about $7 for every program dollar spent.
Another effective debt reduction tool is the Access to
Financial Information Project, which automates access to
financial data. Unreported bank accounts and account balances
that are in excess of the prescribed limits are one of the
leading causes of overpayments in the SSI Program.
The resources available for this project constrains us to
only using it in a few States. Additional funding would help us
to eliminate many of the SSI overpayments.
We also have comprehensive debt collection programs that
use both internal and external tools to collect what we are
owed. Internal debt collection methods include benefit
withholding and cross-program recovery. External methods
include tax refund offsets, administrative wage garnishment,
and Federal salary offset.
In conclusion, Mr. Chairman, I want to assure you that SSA
is committed to ensuring that the public receives the benefits
they are due and assuring taxpayers that the Trust Funds and
general revenue funds are accurately and efficiently spent. We
are responsible for over $610 billion in OASI and SSI benefit
payments annually, and we take seriously our stewardship
responsibility.
We focus our program integrity efforts on those activities
that yield significant returns on investment, and we believe
that our efforts have yielded significant results so far.
We know that if Congress provides SSA with sufficient
administrative funding, we will be able to do even more.
Again, I want to thank the Subcommittee for giving me this
opportunity to discuss our program integrity activities. As
always, we welcome this opportunity to work with you and to
provide any additional information you may need. And I will be
happy to answer any questions you may have.
Senator Carper. Mr. Rust, thank you very much, and thanks
for the work that you all are doing, the good work that you are
doing on this front.
I want us to start off by focusing on this issue of what
more the Congress could be doing to support you in your
efforts. I think you call it program integrity activities. It
sounds like there is more that we ought to be doing, could be
doing, or that you could be asking us to do on program
integrity activities.
Where are we falling short, we, collectively, the Congress?
It sounds like the President is asking for resources in his
budget to do these various things, these activities, and it
sounds like we are not providing those to the extent that maybe
we should.
Mr. Rust. Until the current year, as I stated, with a
concerted effort on the part of the Congress, we received the
President's budget plus a little bit more, $148 million over
the President's budget.
But for the previous six budget requests, we were almost a
billion dollars under the President's budget in terms of the
actual appropriations, about $919 million cumulatively over
those 6 Fiscal Years.
Senator Carper. I am sorry. Say that again. I lost that
thought.
Mr. Rust. In Fiscal Year 2008, the Congress appropriated
the President's budget plus a little bit more. In the six
preceding years, we were under in every one of those years, and
the aggregate for those 6 years was almost a billion dollars,
$919 million below the President's budget request.
Senator Carper. So in 2008, the current Fiscal Year, we
actually appropriated the President's budget request to support
these activities?
Mr. Rust. The first time was Fiscal Year 2008, the current
year.
Senator Carper. Well, that makes me still----
Mr. Rust. In fact, if you go back to 1975--I want to double
check this--I believe we have only received the President's
budget request five times in the last 33 years.
Senator Carper. Yes.
Mr. Rust. Part of our problem is that we are an agency
under stress because we have the baby boomers beginning to
retire. We have a smaller workforce. In the 1970s and 1980s we
had about 85,000 to 87,000 employees, and now we are down to
about 60,000, a number that matches where we were in 1973. So
in terms of human resources and other resources, we are an
agency under stress.
Senator Carper. OK. Earlier, when I think Mr. Werfel was up
here, I was suspecting that the President asked for certain
resources to support these program integrity activities; was
asking for them in his budget. We were putting language in the
budget resolution at least paying lip service to supporting
those requests, but then when we were actually appropriating
the money at the end of the line, we were not necessarily
providing the dollars that were reflected either in the request
or in the budget resolution.
And now, it sounds to me like we actually, at least with
respect to the Social Security Administration, that we actually
did our job with the fiscal stewards and the partner that you
had been looking for, at least for this current Fiscal Year.
Mr. Rust. In the current Fiscal Year, yes, sir.
Senator Carper. Well, that is good. Mr. Johnson, can you
share with us your perspectives from your department in the
same regard and that is us being a fiscal steward and a partner
with the Administration on these activities?
Mr. Johnson. Yes. Well, again, sticking with the resources
side of it for just a moment, as I indicated, Congress did at
least beginning--it was more than lip service. I mean, you took
those--that $383 million on fraud and abuse right to the very
end, but on the very last night that was stripped, and I guess
we need more people looking out for that on that very last
night.
But the other thing I was thinking of on these recovery
auditors, where we do----
Senator Carper. You may recall--just let me interrupt you
again.
Mr. Johnson. Yes.
Senator Carper. We had, as you recall, a disagreement with
the Administration. The Administration was asking for a lot of
extra money, a lot of it to go for the War in Iraq. But he was
asking for about $190 billion more in this Fiscal Year for the
War in Iraq and Afghanistan, and we had proposed spending $22
billion more than he had asked for in domestic discretionary
spending.
And at the end, he said--basically, the President said if
any appropriations bills exceed that $22 billion difference, I
am going to veto those.
Mr. Johnson. Yes.
Senator Carper. And I think my recollection is at the 11th
hour, we made some tough choices as to where to trim back in
order to stay within the President's parameters. And that is
where the money I think----
Mr. Johnson. I know. We were caught in the tough choices
problem, and I understand.
The other thing, though, is on recovery audit contracts,
and this issue of whether or not you can pay contingent
payments. I mean, there is a lot of controversy about that. You
have--Congress now has been allowing that in some cases, and
this Medicare breakthrough is very large for us. It does not
mean that there will not be a lot of pushback on that whole
issue.
But that actually works. It gives us our resources paid for
as a result of the construction of the contract itself,
contingent payments.
But I suspect that it will be----
Senator Carper. Sort of like lawyers working on a
contingency basis; is that right?
Mr. Johnson. Well, yes, and we are not doing it----
Senator Carper. Yes.
Mr. Johnson [continuing]. But they are.
Senator Carper. Yes.
Mr. Johnson. Yes.
Senator Carper. But what is happening with these
contractors?
Mr. Johnson. Well, I am just saying there is a lot of
pushback on that, I mean, both from those who say it is an
abusive tactic--if you start to pay them on a contingency
basis, they will be rather abusive. It certainly has to be
controlled, but I do not think eliminating that, which some are
suggesting that we should eliminate that type of contract, I
would just say that it is one that works for us. I think it
works for the taxpayer; and after all that we ought to be
working for the taxpayer.
Senator Carper. Oh, for sure. How can we work for the
taxpayers, but eliminate the abuse or safeguard against the
abuse that some have cautioned against?
Mr. Johnson. Yes. Well, again, we have looked at this on
other fraud and abuse cases. Right now, the fraud and abuse
cases are--we get the money appropriated and then they go out
and find and abuse.
But that is another case where it is potential to use
contingency contractors. I am just saying there is a potential
for expanding that concept.
Senator Carper. OK. All right. Let me come back to Mr.
Dale. I am not sure I really understand the history of how
these improper payments were identified within the FCC.
Mr. Dale. Yes, sir.
Senator Carper. I think I understand the nature of the
program, the Trust Fund, if you will, and how it is created,
but when was the Trust Fund first created? Do you recall?
Mr. Dale. After the Telecommunications Act of 1996.
Senator Carper. So about a decade ago?
Mr. Dale. Yes, sir.
Senator Carper. And from the Trust Fund, monies began being
disbursed roughly when?
Mr. Dale. About 1998, 1999--that timeframe.
Senator Carper. And when did somebody start looking to
determine whether or not there were improper payments being
made?
Mr. Dale. Well, there were audits of various aspects of the
program that started as early as about 1999. I think between
the period 1999 and before this most comprehensive set of
audits that the Inspector General did, there were about 500 or
it might have been about 600 audits that have been done of
different beneficiaries of the program, typically of the
Schools and Libraries Program, but some of the other programs
as well as part of the USF.
So over about a 6-year period, there were about 600 audits
that were done.
Senator Carper. OK. How much was identified in the IG's
work in terms of--you mentioned this, but I just do not recall,
in terms of improper payments----
Mr. Dale. Sure.
Senator Carper [continuing]. And for what year?
Mr. Dale. The Inspector General did his audit work for the
year 2005.
Senator Carper. Remind me again what was discovered in
improper payments in that year?
Mr. Dale. Sure. Well, there are sort of two data points
here. There were direct improper payments to beneficiaries that
were audited, and then his projection to the universe, his
extrapolation of those results.
The first data point, which are direct improper payments
that he had identified, is in the vicinity of about $46 million
of beneficiaries of the program that were found to have various
problems of one sort or another. And then extrapolated to the
universe of program participants, the Inspector General
estimates more than $900 million could be at risk for improper
payments.
Senator Carper. All right. Now, that was for 2005?
Mr. Dale. Yes, sir. We reported it in our PAR for 2007 at--
he used data for the period 2005----
Senator Carper. PAR stands for President's--what is it?
Mr. Dale. Oh, I am sorry--Performance and Accountability
Report. I have trouble keeping these----
Senator Carper. So do I.
Mr. Dale [continuing]. In my head sometimes.
Senator Carper. You only have one agency to worry about.
Mr. Dale. Sure. The Inspector General started his audits in
the summer of 2006, did about 460 audits total of program
participants, both beneficiaries of the program and also
contributors in the program, and then, from getting the audits
started, auditors up and running, working with independent
accounting firms to actually conduct these government auditing
standard audits of beneficiaries and their compliance with
Commission rules, between that time, summer of 2006 and about
14 months later, he delivered the report to us with the
estimate and the projections across the entire program.
Senator Carper. All right. So, if I understand, the program
was created in 1997 by the Telecom Act. Monies began flowing by
1999----
Mr. Dale. Yes, sir.
Senator Carper. The hundreds of audits it sounds like were
done between 1999 and 2005----
Mr. Dale. Yes, sir.
Senator Carper. And then the IG did his work. Was it before
2005?
Mr. Dale. It did the work; started in 2006, but the data he
was using was 2005.
Senator Carper. Yes. And it sounds like the IG found a
whole lot of improper payments?
Mr. Dale. Yes, sir. He found error rates above 9 percent
and most of--actually in all the programs except the
Contributor Program.
Senator Carper. Now is that consistent with what was found
for the earlier audits done between say, 1999 and 2004?
Mr. Dale. No, it is not. It is higher error rates than were
found----
Senator Carper. A lot higher?
Mr. Dale [continuing]. In error rates. It is hard to do an
apples-to-apples comparison because the audits that were done
beforehand were not a statistically valid set of audits and
some of the programs were not audited with the sort of rigor
that the Inspector General did this time.
Senator Carper. Was there anything in the audits that were
done between 1999 and 2004 that would suggest improper payments
of this magnitude?
Mr. Dale. No, and, from my understanding, the Inspector
General relied on the earlier audit results and using the
statistical formula from the Office of Management and Budget
determined that the number of auditees that would be--or audits
that would be taking place in this program, and so the error
rates that he was looking at beforehand informed his decisions
about the number and type of audits to do this go around.
And looking at these error rates, there is also an
associated margin of error that is outside the Office of
Management and Budget's guidance on what the margin of error
should be. And so the Inspector General is expanding the number
of audits that he is going to do going forward so that we can
get a more precise estimate of the baseline of improper
payments in the program.
Senator Carper. OK. I think you maybe just answered this,
but let me just ask it anyway.
Mr. Dale. OK.
Senator Carper. When Mr. Werfel and Mr. Williams were up
here, I understood them to say that the programs that we have
been looking at for improper payments since 2004 we have
actually seen the level, for the most part, of the improper
payments diminish over that period of time, because we are
focusing on the agencies; we are focusing on them, and they are
getting better at doing their job.
Is there reason to believe that you can now drive these
numbers down?
Mr. Dale. We certainly hope so.
Senator Carper. I hope so, too.
Mr. Dale. We have been working hard really to exceed the
standards that you had established about the type of work that
we need to do. So, when we had identified with our risk
assessment two programs, and I think this is part of the
benefit of having the Inspector General do this work, the
Inspector General wanted to do not just the two programs, but
to evaluate compliance with all four of the USF programs.
It has turned out that one of the programs that we thought
was not at risk, the Low Income Program, had a higher error
rate than we anticipated.
So, now, we are at the stage where this year, the Inspector
General should complete this expanded audit program for all
these funds that we have here.
Senator Carper. For what years?
Mr. Dale. I believe he will be auditing for the 2006 period
and so we plan to get--he has informed me that he expects to
get these results completed by the end of this Fiscal Year. So
we would get that in our PAR for 2008, the financial statements
that we report in 2008.
Senator Carper. Now, for the monies that have been
identified as improper payments in 2005, how do you go about
recovering those?
Mr. Dale. Right. There is an administrative process that is
established under the Commission's rules. We work with this
non-profit company that basically issues a letter to those
parties who have been found to have not complied with the FCC's
rules, and we start to take the money back. In some of these
previous audits that I had mentioned that took place recoveries
have been underway. I think we have recovered out of those
previous rounds of audits, I think there is about $38 million
or $40 million that we have already recovered from the earlier
set of audits. I had mentioned earlier there is something on
the order of $60 million to $70 million total that is
identified for potential recovery out of the Inspector
General's audits this time.
Those recovery efforts are underway. A very small amount
has been recovered right now just because we are early in the
process.
Senator Carper. What happens again to the monies that are
recovered? How do you dispose of them?
Mr. Dale. The administrator is supposed to recover the
money, and they effectively issue a letter and then the
parties, the program participants, could appeal the decision or
not and so sometimes it falls into litigation.
So we have some millions of dollars that we have tried to
recover from various program participants in the past that is
currently caught up in litigation.
Senator Carper. Have any dollars been recovered?
Mr. Dale. Yes, sir. At least $38 million have been
recovered.
Senator Carper. And what has happened to that $38 million?
Mr. Dale. That has gone back into the fund so it can be
used for the program. And then for the Inspector General's
audits that he just completed that are used to estimate our
error rates for improper payments, it is a little less than a
million dollars has been recovered in the past 3 months. And I
believe there have been something on the order of $5 million or
$6 million that has been really at the start of the pipeline of
recovery and then we are working to recover the remaining. It
is about $60 million or $70 million.
Senator Carper. OK. Thanks. Mr. Christopherson, I think you
told us that the School Lunch and School Breakfast Programs are
now being examined or have been examined for the first time.
And what we found is that monies were improperly spent--not
a big surprise. We have a son who is still a senior in high
school, so I have got some idea what the challenge that schools
have to try to identify who is eligible for the School Lunch
and School Breakfast Programs.
We were talking earlier, I think it was with Mr. Werfel and
Mr. Williams about how one of the challenges is to have access
to some kind of third-party data to be able to verify that
folks are eligible or not eligible.
Let me use that as a way to ask how are we identifying?
What kind of difficulty are we having in identifying folks who
are eligible or not eligible for these programs, considering
they are in thousands of schools across America? What kind of
difficulty are we having in getting the third-party data to be
able to verify whether folks are or are not eligible? It has
got to be difficult.
And then, when you identify them, how do you go back and
recover?
Mr. Christopherson. I think you know that these programs
are fairly complex, and we serve somewhere close to about
100,000 schools per day. And as we are looking at our first
year in measuring these programs and pretty tough on our
agencies as we go through this, but we have put it into two
separate buckets, which is kind of qualifying paperwork, which
is about half, and then the count and the certification, so it
comes back to menu items and things like that.
So, did you get your vegetable or your fruit, because there
is a specific menu that has to be an approved menu, and if it
is not an approved menu, then you fail. If a child goes through
and they pick up one vegetable and they get to the end of the
line and they are supposed to have a vegetable and a fruit,
based on the requirements under the program, that is a failure.
If they have been qualified as a partial subsidy when they
should be a full subsidy under the program, that is a failure.
So there is a lot of different areas where this has a very
complex tapestry in the way that it operates and, obviously,
Food and Nutrition Service has been very heavily involved in
that.
But as you were saying, we have, under the last WIC
authorization, we are allowed to actually go in and have a
mandatory direct certification into the food stamp system. That
is being deployed out to the schools. It will probably take
several years to actually put that in.
And what will happen is those children that are--or those
families that are in the system they will not have to go
through the qualifying paperwork, which will be exceptional.
The other ones that are not in the food stamp program----
Senator Carper. Just let me interrupt you. Just explain in
real simple terms for me, if you will. How does the system work
now? How is it going to be made more effective or more cost
effective?
Mr. Christopherson. OK. In the simplest terms, the program
now works----
Senator Carper. Feel free to give me some examples. That
helps me.
Mr. Christopherson. That if you came in and you requested--
--
Senator Carper. You being?
Mr. Christopherson [continuing]. Food assistance, being a
citizen and in the school district, you came in and requested
food assistance under the School Lunch Program and the
Breakfast Program, you would be handed a form. You would go out
and fill out that form. Under the current legislation
requirements, a school would then go through and they would
take about 3 percent of that pooling of forms and then request
additional information based on that and that additional
information would be a qualifying pay stub or some sort of
information that would say that you truly qualified for that
program.
So that is the simplest approach that I can give you, which
is pretty close to the way it is.
Under the new program--in the new methodology what will
happen is that if you are already on food assistance, then you
will not have to go through the qualifying paperwork.
Senator Carper. And for food assistance, what we used to
call food stamps?
Mr. Christopherson. Right. The Food Stamp Program.
Senator Carper. So going forward, for families that are
eligible for food stamps, they will automatically be eligible
for free and reduced price lunches or breakfasts?
Mr. Christopherson. Both. If you qualify under the Food
Stamp Program, then you would qualify and then you would have
the ability--the schools will have the ability actually to
queue that record to see if that family is in there, which
obviously will shrink the pool of risk then, both on the two
different aspects of this, those that have at risk that they
appear that they only qualify for a partial payment when they
should qualify for a full or vice versa. And so we will
eliminate a lot of that risk.
So the pool will shrink and then we will have the people
that come in and request if, that they are not in the food
assistance program.
And so, therefore, when we get into the 3 percent, we will
have a smaller pool that we are judging as well.
Senator Carper. OK.
Mr. Christopherson. So I should be very helpful.
Senator Carper. OK. Good. We are right about at the end of
where I hope to wrap up.
One of the things I would like to ask this last question.
Other questions we will simply submit for follow up from you.
But one of the things, and I like to do this a lot when we
have a panel like this, just to remind me of our takeaways. For
those of us who serve on this panel and on this Subcommittee,
what should our takeaways be from the testimony that we have
heard to date to enable you to really ensure that your agencies
and other agencies--some out there are doing a good job on this
stuff, and some that are not. But what are the takeaways for
us.
And, Mr. Rust, if you would like to lead it off. If you do
not, then we will ask Mr. Johnson to.
Mr. Rust. No, I think there are several legislative
proposals in the President's budget that will be coming up next
week. I think that if you would consider those seriously, they
would help us to, for instance, greatly simplify our program.
Part of the problem we have, the same problem that many of our
colleagues on this panel have, and that is a very complicated
program. For example, when you have individual eligibility, a
person could be eligible at the time we grant the benefit and
then that person could lose that eligibility for some reason in
the coming months or years.
In order to address these types of issues, we have several
proposals to simplify the program. For instance, one of the
things that we will be asking the Congress to look at would be
a change in the offset for the Workmen's Compensation benefits
that would greatly simplify the program. I think it would make
it easier for us to administer the provision and reduce the
overpayments and underpayments. That proposal will be in the
President's budget.
Senator Carper. OK.
Mr. Rust. That is certainly one of the things that I would
mention. There are several other provisions that we will be
sending to Congress during the course of the year that will
help us with program simplication.
Senator Carper. When will you send those up, Mr. Rust? Are
they part of the budget? Are they part of some other request?
How do they come to us?
Mr. Rust. Well, they will come in different ways. But two
or three of them are contained in the President's budget and
have been for the last couple of years. They have not been
enacted, and it would be helpful to the agency if the Congress
would consider them.
Senator Carper. And what committee in the Senate would have
jurisdiction? Any idea? Would it be the Finance Committee?
Would it be the Health Committee?
Mr. Rust. Probably the Finance Committee would be the
committee of jurisdiction.
Senator Carper. All right.
Mr. Rust. If it would be helpful, we would be glad to
advise you and your staff.
Senator Carper. Yes. I have learned after 7 years in the
Senate that sometimes it is helpful to convene not a hearing,
but what I call a roundtable, where it is just less formal,
less structured and it is an opportunity for a lot of give and
take, and maybe we could have a roundtable that would focus on
what we can be doing and ought to be doing on the legislative
side to support what you all are trying to get done in the
Executive Branch in this regard.
Mr. Rust. We would be glad to participate.
Senator Carper. Good. That would be good. Thank you. Mr.
Johnson.
Mr. Johnson. I am quite interested in your new legislation
and you made a statement.
Senator Carper. You want to be a co-sponsor?
Mr. Johnson. Well, for parts of it. You made a statement,
if doing so is cost effective. And I like that statement
because----
Senator Carper. I said it twice.
Mr. Johnson. Yes, you did, and I wrote it down because it
is an important statement, and as you consider new legislation,
it is important that we make sure that we do have this risk
based approach, which we should have, but that we also then
make sure that we are not spreading resources too thin
And one of the things that happens to us is we spend
administrative money, but the recoveries generally go directly
to the Treasury or to a Trust Fund.
So we keep no part of those recoveries to expand the
program itself.
Senator Carper. So what incentive do you have other than
doing what you are supposed to do?
Mr. Johnson. Yes, we are doing what we are supposed to do,
and we have to account for you. And that is my big incentive is
to----
Senator Carper. Well.
Mr. Johnson. Knowing that I am going to be----
Senator Carper. Can there be some other incentive for the
agency?
Mr. Johnson. Well, yes, I think there could be if there
were some allowance that we could use part of those recoveries
to help the program or to use in the program. That would be a
great assist.
Senator Carper. Yes, we are working on a similar approach--
John Kilvington, our staff director, and our friends on the
Republican side, our minority staff, are working on surplus
property recovery----
Mr. Johnson. Yes.
Senator Carper [continuing]. To ensure that if an agency
simply finally moves on, sells, unloads surplus property that
they get to keep part of the proceeds to provide an incentive
for them. Otherwise, there is not much of an incentive for them
to move those properties.
Mr. Johnson. And that does worry me, because if we are
going to expand now the number of risk programs, and even when
we talk about some of these legislative changes that are no
cost, there are internal costs. I mean, you just do not carry
things out without internal costs. So if we can get a nexus
between recoveries and some assist on program integrity, that
would be wonderful.
Senator Carper. OK. Well, I hope you will participate in a
roundtable, and I hope you will make that point again and
again. That is a good point.
Mr. Johnson. Thank you.
Senator Carper. Mr. Dale, any takeaways for us?
Mr. Dale. I just think from our perspective it would be
acting on the Inspector General's request for resources that we
can maintain an effective oversight of the program. I know we
are very appreciative of the $21.48 million we received this
year, and we are going to be looking to ask for additional
resources to keep this strong oversight going.
Senator Carper. How much, $21 million?
Mr. Dale. We received $21.48 million for----
Senator Carper. For 2008?
Mr. Dale [continuing]. For Fiscal Year 2008; yes, sir.
Senator Carper. Do you recall what you asked for?
Mr. Dale. That was what we asked for. And we are putting
our request in next week for additional resources as well.
Senator Carper. All right. Thank you. Mr. Christopherson,
takeaway for us, please?
Mr. Christopherson. Yes, a couple of things. I would go
ahead and echo the same thing with the group and add one more,
echoing, of course, that as we do the President's budget we do
it with a very sharp pencil, and we are very exact how we do it
in order to be very conservative in those, and as we go through
and as discretionary funds and stuff are cut out of them, it
makes this difficult often to continue to operate in these
programs and things like that as we start looking at
priorities.
And I say that very respectfully because I know that you
guys also have priorities in the Senate and the House.
But I would also like to point out that we do risk
assessments on all of our programs at USDA, and I know in many
other departments as well they do the same thing as they do a
preliminary risk assessment, and we are very pointed in those.
And it has taken us a couple of years to actually get those to
more of an exact level, so as management looks in, they say
this does not make sense. This looks like medium risk.
Therefore, we need to fine tune our risk assessment inside the
agency, and we finally feel like we have gotten there are USDA
and I know that other departments are actually going through
that same process.
So this is becoming a very fine tuned initiative as we go
forward.
And the third point is that one of the things that we found
at USDA and realized that we have a myriad of programs versus
just a single mission, we have a myriad of programs and very
different missions, so between Forest Service and Food and
Nutrition and the Farm Service Agency. But the point that I
would like to make on this is that there is not one solution to
correcting this issue.
We found as we sit down and we go through the creativity
with each one of the agencies what is good for Food and
Nutrition to fix this issue is very different for the Farm
Service Agency to fix a problem there that we dealt with last
year, and we very quickly found a resolution and they very
quickly moved a correction process forward.
So that is the other point that I would make is that there
is just not a broad brush that would fix this problem. It is
very detailed, and you really have to go in and look at that
detailed analysis and analyze that out.
Senator Carper. All right. Thank you.
Mr. Rust. Mr. Chairman, may I make just one other comment
real quick?
Senator Carper. Sure.
Mr. Rust. When you asked about things that Congress could
help us with----
Senator Carper. Yes, sir.
Mr. Rust [continuing]. We had a budget request for Fiscal
Year 2008 of $213 million above the cap--solely for integrity
programs. That disappeared in the final appropriations process.
So while our base budget reached the President's request,
we lost that couple hundred million dollars above the cap that
we would have been able to use for integrity programs. I do not
know why, but that is something that Congress could keep an eye
on for us.
Senator Carper. Remind us of that at a roundtable, please.
Well, I know some people do not think this improper
payments stuff is all that interesting. There is the press
table over there, it is not overflowing with representatives
from the press. But it is important stuff, and, as we saw from
our charts over here earlier, the amount of money here that is
involved in improper payments I guess last year was about the
size of the GDP for the country of Vietnam, a country I know a
little bit about as a Vietnam war veteran. And they did not
have much of a GDP to brag about, but they do now. They are a
bustling country.
So that is a fair amount of money that is in question here
for us, and one of the things I am encouraged about as we look
to prepare to leave is that the programs that we have been
actually focusing on since 2004, it sounds like our agencies
generally are driving down improper payments. That is good. I
am pleased to hear that we continue to expand the number of
programs that are being examined and that we are scrutinizing
each year. That is encouraging.
I am pleased, on the one hand, to hear some ways that we
have actually funded the President's budget request in some
regards to give you the ability to work on these program
integrity activities.
But it sounds like a couple of areas we did not, and we
want to make sure that we are doing a better job there.
The other area, recovery. Mr. Johnson talks to us about
some things that are going on in Health and Human Services on
program recovery that are very encouraging, and I think the
potential for doing that nationally is extraordinary. And we
want to encourage that.
We want to find a way, if we can, to incentivizeagencies to
go out to do this work, not just as you explain it as the law.
You have to do it. But to say not only do you have to do it,
but if you do, you will have the ability to keep some of these
resources to run your programs better and to better do your
job.
This our sixth hearing on this subject in 3 years, which is
a lot of hearings. But I think we are understanding things
better; got our arms around it better than we did when we
started. It sounds like you all do, too, and we will keep doing
our share and you do your share, and maybe some day, by the
time I leave here, we will have a improper payments estimate
that is the size of one of those little bitty countries that we
had gathered here under the rubric of 44 countries whose
collective GDP was about $55 billion.
We will leave the hearing record open for a while for my
colleagues to ask questions. I know others have questions. I
have a few more I want to submit for the record. We just ask
that you respond to those in a timely way. We appreciate your
being here today, the good work that is reflected, and for
those that you know and are working with and are not doing
their best, tell them to be more diligent because we are not
going away on this issue.
My hope is that by us not going away, it will sort of give
the Executive Branch the better ability to reach out to the
agencies within the Executive Branch and say look; these
Senators, Coburn, Carper, and Levin, they are breathing down
our necks. They are not going to let us go until we do this
right, so we will do our jobs and be diligent and we know that
you will, too.
With that having been said, this hearing is adjourned.
Thank you, all.
[Whereupon, at 4:46 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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