Auditing and Financial Management:
Post-Hearing Questions Related to Agency Implementation of the Improper Payments Information Act
GAO-05-1029R, Sep 16, 2005
- Accessible Text:
On July 12, 2005, we testified before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Committee on Homeland Security and Governmental Affairs at a hearing entitled "Improper Payments: Where Are Truth and Transparency in Federal Financial Reporting?" At that hearing, we discussed our findings on federal agencies' implementation of the Improper Payments Information Act of 2002 (IPIA) based on our review of agencies' fiscal year 2004 Performance and Accountability Reports (PAR). Our review focused on the extent to which agencies have performed the required assessments to identify programs and activities that are susceptible to significant improper payments, and the annual amount estimated for improper payments by federal agencies. This report responds to an August 24, 2005, Congressional request that we provide answers to follow-up questions relating to our July 12, 2005, testimony.
On August 28, 2003, the Office of Management and Budget (OMB) advised Social Security Administration (SSA) on improper payment reporting. Under this advice, SSA could exclude from its estimate of improper payments those payments that it made following constitutional, statutory, or judicial requirements even though those payments are subsequently determined to be incorrect. These payments were deemed by OMB to be "unavoidable" improper payments, as there are no administrative changes SSA could implement that would eliminate such payments nor would SSA be likely to receive other relief from such requirements. IPIA defines an improper payment as a payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements, and includes any payment to an ineligible recipient, any payment for an ineligible service, any duplicate payment, any payment for services not received, and any payment that does not account for credit for applicable discounts. While the definition of improper payments does not use the terms "avoidable" or "unavoidable," we agree with OMB that a payment that was made following a legal requirement to make the payment subject to subsequent judicial or administrative determinations that the payment is not due should not be included in an agency's estimate of its improper payments. We agree with OMB's conclusion not because it is an "unavoidable" payment but rather because it does not meet the definition of an improper payment under the act. Many of the government programs with improper payments are benefit programs like those of SSA, which involve recipients and providers of services. Although there could be other agencies that also face having to make payments as a result of legal or regulatory requirements, we are not aware of other agencies having raised the issue of "unavoidable" and "avoidable" improper payments. It is our understanding that OMB's advice was specific to SSA. In its fiscal year 2004 PAR, the Department of Defense (DOD) reported it had assessed all programs and activities for susceptibility to significant improper payments, that is, improper payments exceeding $10 million and 2.5 percent of program payments, pursuant to criteria OMB included in its implementing guidance. While we have provided data on DOD's and other agencies' implementation efforts to meet certain requirements under IPIA, we have not analyzed DOD's assessments of its programs nor its improper payment estimates. Based on GAO's most recent high-risk series work and an August 2005 DOD Office of Inspector General (OIG) report on DOD's identification and reporting of erroneous payments, we believe DOD may have other programs and activities that are at risk of making significant improper payments. In our January 2005 High-Risk Update, we identified 25 high-risk areas. Of the 25, 14 areas involve DOD, including 6 governmentwide high-risk areas.