Financial Management: Challenges in Meeting Requirements of the Improper Payments Information Act

The Improper Payments Information Act of 2002 (IPIA) and related OMB implementing guidance require that agencies identify programs and activities susceptible to significant improper payments, estimate amounts improperly paid, and report on the amounts of improper payments and their actions to reduce them. In our March 2005 report GAO-05-417), we determined that 6 agencies (USDA, EPA, FCSIC, NCUA, NSF, PBGC-significant to the U.S. government's consolidated financial statements (CFS)-had not address the IPIA requirements or did not perform risk assessments of all their programs and activities(also known as a risk assessment) as part their fiscal year 2004 IPIA reporting. We recommended that OMB require these agencies to establish time frames and identify resources needed to perform risk assessments and satisfy reporting requirements. Since issuance of our March 2005 report, 4 of the 6 agencies (USDA, NCUA, NSF, PBGC) reported that they had performed agency-wide risk assessments in their annual report. For the remaining 2 agencies, one agency (EPA) was granted relief from OMB, based on OMB's revised guidance, from conducting a risk assessment until fiscal year 2010. While the other agency (FCSIC, an independent federal corporation), had not addressed the IPIA requirements, the actions substantially address the intent of our recommendation.

The Improper Payments Information Act of 2002 (IPIA) and related OMB implementing guidance require that agencies identify programs and activities susceptible to significant improper payments, estimate amounts improperly paid, and report on the amounts of improper payments and their actions to reduce them. In our March 2005 report (GAO-05-417), we determined that OMB 6 agencies (USDA, EPA, FCSIC, NCUA, NSF, PBGC)-significant to the U.S. government's consolidated financial statements (CFS)- had not addressed the IPIA requirements as part their fiscal year 2004 IPIA reporting. We recommended that OMB develop a plan to address the resource needs of those agencies that did not perform risk assessments or satisfy reporting requirements. Since issuance of our March 2005 report, 5 of the 6 agencies (USDA, EPA, NCUA, NSF, PBGC) had addressed IPIA in their annual reporting. Of the 5 agencies, 4 agencies (USDA, NCUA, NSF, and PBGC) reported on applicable IPIA requirements, including conducting agency-wide risk assessments. For the remaining 1 agency (EPA), it was granted relief from OMB (based on OMB's August 2006 revised guidance) from conducting a risk assessment until fiscal year 2010. The other agency (FCSIC) has not addressed IPIA in any of its annual reports since fiscal year 2004 governmentwide implementation. However, this agency is an independent federal corporation and is not significant to the governmentwide improper payments problem. Consequently, the actions taken substantially address the intent of our recommendation.

The Improper Payments Information Act of 2002 (IPIA) and related OMB implementing guidance require that agencies identify programs and activities susceptible to significant improper payments, estimate amounts improperly paid, and report on the amounts of improper payments and their actions to reduce them. In our March 2005 report (GAO-05-417), we found that the governmentwide improper payment estimate did not include 12 programs (Agriculture Marketing and Assistance, Foster Care, State Children's Insurance Program, Child Care Development Fund, 7(a) Business Loan Program, Medicaid, School Programs, Women Infant and Children Program, Workforce Investment Act, Title I, Temporary Assistance for Needy Families, and Community Development Block Grant) with outlays of $248.7 billion in fiscal year 2004 that were required to annually report improper payments under IPIA and had previous improper payment reporting requirements (pre-IPIA) under OMB Circular No. A-11. We recommended that OMB consider, as part of its budget process for any agency that OMB deems to have not taken the IPIA requirements seriously or that has lagged behind, the feasibility of disincentives for agencies' poor performance or adding incentives for agencies making substantive progress. Consistent with the intent of our March 2005 recommendation, agencies have since reported improper payment estimates for these 12 programs demonstrating that agencies have taken the IPIA requirements seriously.