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Financial Management: Coordinated Approach Needed to Address the Government's Improper Payments Problems

GAO-02-749 Published: Aug 09, 2002. Publicly Released: Sep 09, 2002.
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Highlights

This report discusses (1) the amount of improper payments reported in agencies' fiscal year 2000 financial statements, (2) the extent to which agencies' fiscal year 2002 performance plans address improper payments, (3) the extent to which the Office of Management and Budget (OMB) has implemented previous GAO recommendations in this area, and (4) other actions that might encourage agencies to better report improper payments. Of the 15 agency performance plans GAO reviewed, only 4 comprehensively addressed any of the Government Performance and Results Act requirements for evaluating the effectiveness of federal programs and the resources spent on them. GAO found that improper payments often result from a lack of, or breakdown in, internal controls. This report also contains recommendations for agencies to assign responsibilities to minimize improper payments and for OMB to assist agencies in identifying and implementing corrective actions.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
The Congress should consider using available improper payment information to engage agencies in discussions about progress that is being made, additional steps planned, and actions the Congress can take to help reduce improper payments. When, based on these discussions, the congressional actions necessary to eliminate barriers to agency corrective action are identified, the Congress should consider taking the legislative and oversight actions necessary to provide the agencies and the administration with tools needed to reduce improper payments, both at the agency and governmentwide levels.
Closed – Implemented
Public Law 107-300, the Improper Payments Information Act of 2002, calls for (1) the head of each agency to annually review all programs and activites and identify all such programs and activities that may be susceptible to significant improper payments, (2) estimate the annual amount of improper payments and submit those estimates to Congress before March 31 of the following applicable year, and (3) for any program or activity with estimated improper payments that exceed $10 million, report on agency actions to reduce the improper payments.

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Management and Budget The Director of OMB should develop, as a result of interactions with agency officials and through participation on interagency groups, information on lessons learned and best practices that federal agencies have used to address their improper payment problems. Once developed, OMB should issue specific guidance, as GAO has previously recommended, to agencies that provides a comprehensive approach to reducing improper payments, including providing the transparency in reporting that is crucial to addressing this problem.
Closed – Implemented
On May 21, 2003, the Director, OMB, issued Memorandum M-03-13, "Improper Payments Information Act of 2002," that provides guidance to the heads of executive departments and agencies on how federal agencies should implement the Act. The memo notes that, when implemented, the guidance promises to improve the integrity of the government's payments and the efficiency of its programs and activities. The guidance calls for agencies to review all of their programs and activities, perform risk assessments to determine improper payments for programs and activities susceptible to significant improper payments, and report the results and related improper payment information in their annual Performance and Accountability Reports. In addition, OMB has been working with the CFO Counsel's subcommittee on erroneous payments to identify practices and procedures that agencies can consider when developing actions to address their improper payment problems.
Office of Management and Budget The Director of OMB should work with agency officials to provide all reasonable assistance in implementing the corrective action plans developed to reduce improper payments.
Closed – Implemented
As a result of the Improper Payments Information Act of 2002, OMB has issued guidance to all federal agencies on actions needed to reduce improper payments including the performance of risk assessments, implementation of actions to address the causes of improper payments identified, and public reporting of the results of agency improper payment-related efforts. Further, OMB has met with, and will continue to do so, representatives of federal agencies to ensure their understanding of the improper payments requirements and to identify barriers they are encountering that inhibit their efforts to better address improper payments in their programs and activities.
Office of Management and Budget The Director of OMB should work with agency officials to identify and help eliminate or reduce,to the extent practicable, the barriers that restrict agency actions to reduce improper payments. OMB should work with the agencies in clearly defining and evaluating these barriers and in assisting agencies in eliminating them.
Closed – Implemented
By meeting individually with each agency, OMB has begun working with agencies to identify barriers that restrict agency actions to reduce improper payments. Specifically, it has identified data access barriers at the Departments of Education, Labor, Housing and Urban Development, and Health and Human Services and at the IRS. It is currently working on possible actions to reduce the applicable barriers. For example, in the FY 2004 budget, it has proposed to allow the IRS to match income data on student aid applictions with the applicant's tax data to ensure that students do not receive awards in excess of the amount for which they are eligible. It has also identified resource barriers at HHS that erode program integrity. In the 2004 budget, it has proposed to allocate $20 million in Health Care Fraud and Abuse Control funding in 2004 to assist HHS in reestablishing and elevating the importance of financial management oversight.
Office of Management and Budget The Director of OMB should work with the Congress to identify and develop actions to reduce or eliminate, to the extent practicable, barriers that hinder agency actions to reduce improper payments.
Closed – Implemented
Per OMB officials, OMB has worked with several agencies to include in their budget requests to the Congress funding for and authorizations to take actions that reduce existing data access barriers. For example, in the 2004 budget, it has proposed to improve the USDA nutrition programs eligibility decisions through actions under current law and as part of the reauthorization of the Child Nutrition Act. It has proposed to allow the IRS to match income data on student aid applications with the applicant's tax data to ensure that students do not receive awards in excess of the amount for which they are eligible. The budget further proposes $20 million in Health Care Fraud and Abuse Control funding in 2004 to assist HHS in improving program integrity. It also includes an increase of $100 million to lower erroneous earned income tax credit payments at IRS, and legislation to allow IRS to employ private collection agents (PCA's)to help collect known tax debts and to pay PCA fees from receipts. Through these efforts, OMB has demonstrated that it is working with the Congress on these issues and is taking actions to identify and reduce or eliminate barriers.
Office of Management and Budget The Director of OMB should require federal agencies to report the information called for by OMB Circular A-11 on improper payments in a specific, publicly available document such as annual performance reports, annual agency financial statements, or other annual reports. All agencies should report this information in the same document to facilitate oversight and monitoring by interested parties including the Congress and the public.
Closed – Implemented
On May 21, 2003, the OMB Director issues memorandum M-03-13 entitled "Improper Payments Information Act of 2002 (Public Law No: 107-300). This memorandum requires agencies to publicly report improper payment information in the Management Discussion and Analysis section of their annual Performance and Accountability Reports. Depending on the agency, this information is required in either the 2003 or 2004 Performance and Accountability Report.
Department of Agriculture The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Chief Financial Officer, subsequent to delegation from the Chief Operating Officer, is responsible for the actions identified in this recommendation. The department did not issue formal documentation detailing this delegation of responsibility.
Department of Education The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is the responsible agency official for taking the actions contained in this recommendation. This assignment of responsibility was communicated to agency personnel through meetings and to the Congress through CFO testimony on October 3, 2002.
Department of Commerce The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO has been assigned responsibility for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions. The Deputy CFO oversees initiatives related to reducing erroneous payments within the Department in coordination with the current CFO's.
Department of Defense The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Under Secretary of Defense (Comptroller) is responsible for establishing policies and procedures for improper payments and monitors the actions taken to reduce these payments.
Department of Energy The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Chief Financial Officer has been designated as the Energy official responsible for implementing the recommendation. The CFO sent a memorandum to department heads notifying them of the improper payment iniatives.
Department of Housing and Urban Development The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO has been designated as the HUD official responsible for overseeing the agency's improper payments activities. This assignment of responsibility was communicated to agency staff in executive management and audit status meetings.
Department of Health and Human Services The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is responsible for implementing the actions called for in this recommendation. Agency personnel were notified of these responsibilities through a memorandum the CFO sent to department heads.
Social Security Administration The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Deputy Commissioner (Chief Operating Officer) has overall responsibility for addressing SSA's improper payments issues and oversees the agency's efforts to identify and reduce sources of improper payments. Under the improper payments program, 3 Deputy Commissioner-level components have the lead in addressing specific improper payment issues. The Office of Disability and Income Support establishes the operational policies and procedures of the agency to minimize the occureence of improper payments. The Office of Operations implements the operational policies and procedures set by the ODISP. The Office of Finance,Assessment and Management measures the accuracy of program payments through the stewardship studies. Further, every component, directly or indirectly, supports the improper payment reduction program within the agency.
Department of the Interior The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO has been designated as the official responsible for overall Interior efforts in the improper payments area. The agency communicated this assignment in its Strategic Plan and Financial Management Transformation Action Document.
Department of Justice The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO/Assistant Attorney General for Administration has been assigned responsibility for the agency's overall improper payments program.
Department of Transportation The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The department originally assigned responsibility for overseeing its improper payments program to the CFO. That responsibility has been temporarily reassigned to the Associate Administrator for Budget and Policy unitl a new CFO is hired.
Department of Labor The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The agency's CFO has responsibility for managing the improper payments program. The Secretary communicated this assignment to the CFO in a memorandum dated 12/9/2002.
Department of the Treasury The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The department has assigned responsibility for the improper payments program to the Assistant Secretary for Management/CFO. Treasury Directive 27-01 communicated this assignment.
Department of Veterans Affairs The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
Responsibility for implementing DVA's improper payments program has been placed with the Assistant Secretary for Management & CFO. VA plans to communicate this assignment to employees by way of a memorandum from the Secretary.
Department of State The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
At the Department of State, the CFO has been assigned the responsibilities for the improper payments program. This individual will continue the Department's efforts to improve processes and prevent improper payments.
Environmental Protection Agency The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is responsible for implementing the agency's improper payment program. No official memo specific to improper payment responsibilities was distributed, but the CFO has all fiscal responsibility and that has been communicated.
General Services Administration The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is responsible for GSA's improper payments program. The delegation of authority for this responsibility is implicitly stated in a GSA policy document ("Delegations of ?Authority to the Chief Financial Officer') that delegates financial management responsibility to the CFO.
National Aeronautics and Space Administration The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is responsible for NASA's improper payments program. The assignment of this responsibility was communited to agency personnel verbally.
National Science Foundation The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Deputy CFO has been assigned responsibility for NSF's improper payment program. This assignment was communicated agency-wide through staff meetings and by the Management Control Committee, which is an internal controls workgroup.
Small Business Administration The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
SBA's improper payments initiative is the joint responsibility of the CFO and the Associate Deputy Administrator for Capital Access. The CFO is responsible for coordinating internal control activities required by the FMFIA. The Associate Deputy Administrator is responsible for the maintenance of effective internal controls over SBAS's credit programs, including improvements to reduce improper payments.
Nuclear Regulatory Commission The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO is responsible for the agency's improper payments program. The assignment to the CFO was communicated in a memo from senior management to office directors.
Office of Personnel Management The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The Associate Director for Management and CFO is responsible for the Office's improper payments program. The Director, OPM, has also directed the Associate Director for Human Resources Products and Services to work closely with the CFO to implement timely measure identified by the CFO to reduce the risk and incidence of improper payments.
U.S. Agency for International Development The head of each CFO Act agency should assign responsibility to a senior official, such as the COO or CFO, for establishing policies and procedures for assessing agency and program risks of improper payments, taking actions to reduce those payments, and reporting the results of the actions to agency management for oversight and other actions as deemed appropriate.
Closed – Implemented
The CFO has been assigned responsibility for improper payments.

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Topics

Accounting proceduresErroneous paymentsFinancial managementFinancial statementsFraudInternal controlsPerformance measuresQuestionable paymentsStrategic planningImproper payments