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Wednesday, December 06, 2006

Officials debate threshold for reporting payment errors

Two top management officials sparred Tuesday over how deeply agencies should dig to unearth mistaken payments, as lawmakers sought input during a hearing on possible updates to the 2002 Improper Payments Information Act.

David M. Walker, head of the Government Accountability Office, repeated arguments detailed in a report last month that Office of Management and Budget guidance for how agencies should analyze and report on their improper payments is not strict enough. Improper payments are defined as those made mistakenly to ineligible recipients, or as a result of fraud or other error.

Clay Johnson, OMB's deputy director for management, countered that the sheer size of the problem requires the use of some cost-benefit analysis to determine the level of mistakes worth tracking and justifies a reporting threshold that GAO has criticized as too high.

The debate primarily centers on whether OMB guidance on implementing the erroneous payment act leaves an inappropriately large loophole. Agencies are required to annually assess programs that are at high risk for significant improper payments; OMB guidance defines "significant" as payments that both exceed $10 million annually and represent more than 2.5 percent of a program's budget.

Johnson defended OMB's decision to limit reporting, saying the legislation was based on risk assessment, rather than a review of every program. He said OMB has to take into account the expected costs and benefits of agencies' efforts to comply. For example, he said, federal payroll expenses of hundreds of billions of dollars represent "virtually no risk," and should not be examined.

Walker countered that Defense payroll expenses were included in GAO's list of government activities with a high risk of problems. Coburn said payroll should be examined through an improper payments lens, noting that agencies do not monitor federal employee absenteeism that occurs outside of allowed vacation and sick time.

But Johnson held his ground, saying that reducing improper payments in the federal payroll should be "a really, really low priority." The two officials also cited other payments that could be considered improper payments but are not: Walker noted that billions of dollars are paid to contractors annually in unmerited awards and incentives, while Johnson cited billions of dollars in unearned raises to employees.

Subcommittee ranking member Sen. Tom Carper, D-Del., urged the two officials to present their recommendations for how the improper payments law should be revised.

-Jenny Mandel, GovExec.com

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