Financial Management:

Challenges Remain in Meeting Requirements of the Improper Payments Information Act

GAO-06-482T: Published: Mar 9, 2006. Publicly Released: Mar 9, 2006.

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Improper payments are a longstanding, widespread, and significant problem in the federal government. The Congress enacted the Improper Payments Information Act of 2002 (IPIA) to address this issue. Fiscal year 2005 marked the second year that federal agencies governmentwide were required to report improper payment information under IPIA. One result of IPIA has been increased visibility over improper payments by requiring federal agencies to identify programs and activities susceptible to improper payments, estimate the amount of their improper payments, and report on the amounts of improper payments and their actions to reduce them in their annual performance and accountability reports (PAR). GAO was asked to testify on the progress being made by agencies in complying with requirements of IPIA and the magnitude of improper payments. As part of the review, GAO looked at (1) the extent to which agencies have performed risk assessments, (2) the annual amount of improper payments estimated, and (3) the amount of improper payments recouped through recovery audits.

The federal government continues to make progress in identifying programs susceptible to the risk of improper payments in addressing the new IPIA requirements. At the same time, significant challenges remain to effectively achieve the goals of IPIA. The 32 fiscal year 2005 PARs GAO reviewed show that some agencies still have not instituted systematic methods of reviewing all programs and activities, have not identified all programs susceptible to significant improper payments, or have not annually estimated improper payments for their high-risk programs as required by the act. The full magnitude of the problem remains unknown because some agencies have not yet prepared estimates of improper payments for all of their programs. Of the 32 agencies reviewed, 18 reported over $38 billion of improper payments in 57 programs. This represented almost a $7 billion, or 16 percent, decrease in the amount of improper payments reported by 17 agencies in fiscal year 2004. However, the governmentwide improper payments estimate does not include 7 major agency programs with outlays totaling about $228 billion. Further, agency auditors have identified major management challenges related to agencies' improper payment estimating methodologies and significant internal control weaknesses for programs susceptible to significant improper payments. In addition, two agency auditors cited noncompliance with IPIA in their annual audit reports. For fiscal year 2005 PARs, agencies that entered into contracts with a total value exceeding $500 million annually were required to report additional information on their recovery audit efforts. Nineteen agencies reported reviewing over $300 billion in vendor payments, identifying approximately $557 million to be recovered, and actually recovering about $467 million.

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