Werfel: Gov't avoids $47B in overpayments

The federal government avoided making $47 billion in overpayments over the last three years. In addition, the governmentwide error rate dropped from a high 5.4 percent in Fiscal Year 2009 to 4.3 percent in FY2012.

Adding in the number of improper payments avoided during the same three-year period by the Department of Defense in commercial contracts, the overpayment savings rise to $70 billion and the governmentwide error rate sinks to 3.7 percent. Danny Werfel, the controller of the Office of Management and Budget, announced these figures Wednesday in a blog post on the agency's blog, OMBlog.

Werfel wrote that error rates dropped in major programs across the government, including Medicare Fee-for- Service, Medicaid, the Earned Income Tax Credit and SNAP (Food Stamps). He added the Department of Labor is also working with states to reduce Unemployment Insurance improper payments.

- Michael O'Connell, FederalNewsRadio.com
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SESers recognized for leadership, results with Presidential Rank Awards

Teresa Gerton led an effort for the Army that could help the service avoid spending more than $800 million over the next five years.


Deborah Taylor improved the financial operations of the Centers for Medicare and Medicaid Services, which led to the return of $850 million to the Medicare Trust Funds.

And Steve Butler led an effort for the Air Force Material Command to improve how they address high-risk aircraft maintenance that could help the service avoid spending $1 billion.


Gerton, Taylor and Butler were among the 2011 Presidential Distinguished Rank Awardees honored Thursday night at the 27th annual Senior Executives Association Banquet in Washington. See full list of winners here.

-Jason Miller, FederalNewsRadio.com
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Agencies cut improper payments by $18 billion

Agencies saved nearly $18 billion in fiscal 2011 by reducing improper payments, the White House announced Tuesday. The administration also unveiled new steps to prevent the government from paying money to the wrong people.


Agencies saved $17.6 billion last year, by reducing payment errors in Medicare, Medicaid, Pell Grants and a food assistance program.

President Barack Obama initiated the crackdown on improper payments two years ago, when he gave agencies the goal of reducing payment errors by $50 billion before 2013. The effort has since become part of the administration's Campaign to Cut Waste, which seeks to apply lessons learned by the Recovery Accountability and Transparency Board to all federal spending.

As part of the crackdown, agencies reduced the 2011 governmentwide payment error rate to 4.7 percent, the administration said. In 2010, it was 5.3 percent.


The Medicare and Medicaid programs shouldered the bulk of savings, avoiding $16 billion in payment errors, Health and Human Services Secretary Kathleen Sebelius told reporters.

USDA also prevented $800 million in improper payments under its Supplemental Nutrition Assistance Program, formerly the food stamps program, according to the administration.

In announcing the reduction of payment errors, the White House also revealed new steps to improve agency suspension and debarment programs.


-Ruben Gomez, FederalNewsRadio.com
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Recent GAO Publications

The Government Accountability Office (GAO) recently released the following reports and correspondence:

Information Technology: Actions Needed to Fully Establish Program Management Capability for VA's Financial and Logistics Initiative.
GAO-10-40, October 26.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-40
Highlights - http://www.gao.gov/highlights/d1040high.pdf

Recovery Act: Contract Oversight Activities of the Recovery Accountability and Transparency Board and Observations on Contract Spending in Selected States.
GAO-10-216R, November 30.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-216R

U.S. Government Accountability Office: Performance and Accountability Report, Fiscal Year 2009.
GAO-10-234SP, November 13, 2009
http://www.gao.gov/cgi-bin/getrpt?GAO-10-234SP

Budget Issues: Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure Is Needed.
GAO-10-11, November 20.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-11
Highlights - http://www.gao.gov/highlights/d1011high.pdf

Indian Health Service: Updated Policies and Procedures and Increased Oversight Needed for Billings and Collections from Private Insurers.
GAO-10-42R, October 22.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-42R

Centers for Medicare and Medicaid Services: Deficiencies in Contract Management Internal Control Are Pervasive.
GAO-10-60, October 23.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-60
Highlights - http://www.gao.gov/highlights/d1060high.pdf

Federally Created Entities: An Overview of Key Attributes.
GAO-10-97, October 29.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-97
Highlights - http://www.gao.gov/highlights/d1097high.pdf

Today's GAO Publication

The Government Accountability Office (GAO) today released the following correspondence:


Centers for Disease Control and Prevention: Changes in Obligations and Activities before and after Fiscal Year 2005 Budget Reorganization.

GAO-08-328R, February 25.
http://www.gao.gov/cgi-bin/getrpt?GAO-08-328R

Today's GAO Publication

The Government Accountability Office (GAO) today released the following correspondence:

Centers for Disease Control and Prevention: Changes in Obligations and Activities before and after Fiscal Year 2005 Budget Reorganization.
GAO-08-328R, February 25.
http://www.gao.gov/cgi-bin/getrpt?GAO-08-328R

Today's GAO Publication

The Government Accountability Office (GAO) today released the following report:

Centers for Medicare and Medicaid Services: Internal Control Deficiencies Resulted in Millions of Dollars of Questionable Contract Payments.
GAO-08-54, November 15.
http://www.gao.gov/cgi-bin/getrpt?GAO-08-54
Highlights - http://www.gao.gov/highlights/d0854high.pdf

2007 GCN Award: CMS team develops a centralized accounting system to get a handle on an eighth of the federal budget

WHAT: Healthcare Integrated General Ledger Accounting System at the Centers for Medicare and Medicaid Services in the Health and Human Services Department.

MISSION: Administer Medicare and provide federal oversight of state Medicaid programs.

CHALLENGE: A combination of manual procedures and incompatible computerized accounting systems at several dozen regional Medicare contractors led to nonstandard billing, payments and reporting.

SOLUTION: Planned since the late 1990s, starting in 2005 and through this year, HIGLAS, an Oracle 11i-based accounting system, is online with 10 contractors. More contractors will get the system by the end of 2011.

IMPACT: There are far fewer errors, faster claims processing and reduced interest charges, which helps CMS determine the difference between accounts payable and receivable. COST: $853 million is the projected total; $527 million had been spent through fiscal 2007.

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Financial chiefs make progress on audits, improper payments

In 1991, a year after Congress passed the Chief Financial Officers Act requiring agencies to exercise better financial controls and provide accurate and timely financial data that could be reviewed by independent auditors, only one of the 24 agencies covered by the law was able to receive a clean bill of financial health -- the General Services Administration. Now, 19 departments and independent agencies have received clean audits for the past two years.

To Linda Combs, that's incredible progress. She should know. Combs served in numerous financial management positions across the federal government, beginning with the Reagan administration and ending last month, when she retired after two years as comptroller at the Office of Management and Budget.

Today, 12 agencies have achieved that standard, according to OMB. "CFOs have taken a lot of responsibility for helping their business units to use financial data in better ways. What I like to say about the CFO Act is that it took CFOs from the backroom to the boardroom. I think [Comptroller General] David Walker first said that, but I've adopted that quote because it's so descriptive of what happened," Combs says.

Progress hasn't come easily. Only in the last two years have most agencies been able to meet the 45-day reporting requirement for providing financial statements at the close of the fiscal year -- and many of those reports were filed only after Herculean manual efforts by employees working overtime to meet the deadline.

Progress has been labor intensive, but it's also been measurable. In an area of particular importance to taxpayers, OMB estimates that improper payments declined to $36.3 billion for programs that reported $45.1 billion in 2004. While that's still a lot of money paid out incorrectly, it's an improvement, relatively speaking.

Timothy Hill, director of the Office of Financial Management and chief financial officer at the Centers for Medicare and Medicaid Services, told the House Budget Committee in July that CMS executes four parallel strategies to reduce error rates: prevention of improper payments, early detection of errors, coordination with outside entities to identify fraud, and enforcement.

This year, CMS estimates that Medicare contractors will process well over 1 billion claims from providers, physicians and suppliers for items and services covered by the program. Last year, Medicare outlays were nearly $382 billion.

Another area of notable progress across federal agencies has been real property management. Two years ago, the government had no centralized inventory of its real property -- no reliable data reflecting the operation and maintenance costs of federal facilities, where facilities were located, what condition they were in, whether they were critical to agencies' missions. In 2005, OMB launched an effort to create such an inventory. In the process, it disposed of $4.5 billion in excess property.

Chief financial officers at every agency share a common purpose. They all are responsible for ensuring that agencies comply with accounting and reporting laws, and they play key roles in strategic planning. But their function can vary significantly from agency to agency. When William M. McCabe was acting chief financial officer at the Education Department, his attention was on the business of making loans and issuing grants.

"The primary focus was an outflow of cash," he says. Now he is chief financial officer at the Nuclear Regulatory Commission, an agency that bills for a lot of the services it performs for its mission of ensuring safety and security at civilian nuclear power plants. "The focus has a more commercial bent -- billing for services, recovering that money," he says.

For many CFOs, including McCabe, improving finance and accounting systems has required greater cooperation with other chief executives, especially chief information officers. "I work very closely with our new CIO, Darren Ash," says McCabe. "We're working on many fronts together, looking at investments as a portfolio other than a single stovepipe, system by system. We want to make sure we're spending money wisely and not redundantly."

The Nuclear Regulatory Commission formed a capital planning and investment control process, chaired by the CIO, to make sure investments in technology are tied to the budget and planning process. "It becomes more and more critical the larger we get. It comes down to managing this growth," McCabe says.

It was a similar level of cooperation between CIO and CFO that led the Homeland Security Department last year to cancel its financial management modernization program known as eMerge, after investing more than $52 million -- but well before spending an estimated $229 million on the system.

Homeland Security, which was formed from the merger of 22 agencies in 2003, inherited dozens of separate financial systems that were unable to share data across the department, creating a host of problems with functions ranging from paying employees accurately to processing travel vouchers. The eMerge program was intended to integrate finance, accounting, procurement and asset management systems, but it ran into technical challenges and the department cut its losses, said David L. Norquist, Homeland Security's chief financial officer, at a Senate hearing in June.

Homeland Security is migrating agencies to one of two finance and accounting systems adopted by the Customs and Border Protection directorate and the Transportation Security Administration. "When you review the different systems the department has, these two agency solutions stand out. They use core accounting applications that are also used by other large federal agencies with unqualified audit opinions," said Norquist.

Rather than buy a new departmentwide system, Homeland Security plans to migrate nearly all agencies to either the TSA system or the CBP system by 2011. At that point, the department plans to choose one of the two to meet all its financial management needs.

When it comes to financial management, the Defense Department remains the elephant in the room. With an operating budget that dwarfs all other agencies combined, finance and accounting systems there are hugely complicated, and most weren't designed to provide data in the way agencies are now required to provide it.

By focusing on material weaknesses that are problems across the department, Defense is making measurable progress, according to a senior official at OMB: "They have very specific action plans associated with strengthening controls around the inventory and valuation of those different items, and they've made measurable progress in improving the readiness of those audit areas."

This year, in a first for any large component of the Defense Department, the Army Corps of Engineers is going through an outside audit. The audit, which was being conducted "off cycle," according OMB, was not yet complete at press time, "but the fact that they were ready to do an audit and have gone through 97 percent of the process at this point -- and things look like they went very well -- is tremendous progress," the OMB official says. Another major entity at Defense -- the Marine Corps -- is nearly ready to face outside auditors as well.

-Katherine McIntire Peters, GovExec.com

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Better business documentation could take years to become habit, OMB says

Less than a month before the deadline for agencies to prove their key business processes and controls are on the up and up, the question isn’t “How did it go?” but “How is it going?”

“It’s going to take time. We knew this. This first year was going to be a learning experience. We expected to find out where the potholes are,” said Danny Werfel, deputy controller in the Office of Management and Budget’s Federal Financial Management Office. He was addressing federal managers and business consultants at an Oct. 26 conference sponsored by consulting firm INPUTof Reston, Va.

In order to comply with OMB’s Circular A-123, departments must thoroughly document their key business processes and controls — everything from ensuring that payments match invoices to proving that their accounting staffs correctly log liabilities into their books. As with the 2002 Sarbanes-Oxley Act regulations affecting the private sector, the hope here is that better documentation will highlight trouble spots early on and improve overall financial management.

Final assurance statements on the circular are due to OMB by Nov. 15. Werfel said it’s going to take some time to determine how agencies fared.

Successful agencies have treated the task as more than just a “check-the-box, paper exercise,” Werfel said. “It must be integrated with other financial management processes.”

After a year of A-123, agencies have learned that employee buy-in must reach beyond chief financial officers, into the program staff. They’ve also learned it’s best to start with documenting a limited number of processes rather than everything at once.

“I heard one CFO say three years, and I think that’s about right,” said Paul Konka, who leads A-123 efforts at the Health and Human Services Department’s Centers for Medicare and Medicaid Services. “The first year is a learning experience. The second year, you’re taking advantage of what you’ve learned. By the third year, you’ve hit your stride.”

Housing and Urban Development Department CFO John Cox said he agreed with the three-year estimate. He also seconded the idea that the effort must reach beyond the CFO’s office.
“You mention internal controls to a program manager and they slip into a coma. But you must tell them, it’s about improving the program and improving the flow of information that we get for your program,” Cox said. “It’s about giving program managers better information about how they spend taxpayer money.”

Though the deadline for fiscal 2006 still looms, both Konka and Cox are already pressing on with ideas to expand future efforts.

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Officials share strategies for complying with new financial management rules

Agencies should leverage existing audit work to comply with new financial management rules, and should expect the initial pain of compliance to last at least three years, officials said Thursday.

At a forum organized by Reston, Va.-based market analysis firm INPUT, government officials shared early lessons learned from the first year of implementing new financial reporting standards contained in the Office of Management and Budget's Circular A-123, the rulebook for financial management accountability and controls.

Paul Konka, director of debt referral and oversight at the Centers for Medicare and Medicaid Services, said his experience with implementing the new rules demonstrated the value of relying on other audit and reporting procedures to jump-start compliance. The first deadline under the revised Circular A-123 was in June, and required that agency managers attest to the effectiveness of their processes for financial reporting.

Konka and John Cox, chief financial officer at the Housing and Urban Development Department, agreed that, based on their experiences, agencies might overcome the early challenges of implementing Circular A-123 by their third time through the annual process, but Konka stressed that education will be an enduring part of the equation. He said building acceptance of the process with program managers was an important part of compliance for CMS, because those managers interact with the auditors.

The rules, which were instituted as the government's version of the private sector's 2002 Sarbanes-Oxley Act in response to several accounting scandals, differ from that law in that they pin less accountability on top officials, Cox said. Private sector CFOs can lose their bonuses and even their jobs based on Sarbanes-Oxley violations, he said, while consequences are not spelled out for government officials.

But he said government has its own limitations that do not apply in the private sector. For example, he said, many internal controls rely on information technology and might require new IT systems, but annual budget cycles make it difficult to plan and execute the kind of multiyear budgets that IT often requires.

Cox said he has found ways to use A-123 to reform internal procedures. For example, he learned that some parts of HUD far exceed the minimum requirement of three levels of approval for travel expenses. When new technology solutions streamline the tracking process, those additional layers of review and approval will be eliminated.

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FederalNewsRadio - Ask the CFO - Tim Hill (CMS)

• Lessons form the Medicare Prescription Drug Improvement and Modernization Act
• Cracking down on improper payments
• Rolling out the largest Oracle Federal Financial application on the planet

Tim Hill is the Centers for Medicare & Medicaid Services' (CMS') Chief Financial Officer (CFO) and the Director of the Office of Financial Management (OFM). As CMS's senior financial management executive, he is accountable and responsible for planning, directing, analyzing and coordinating the agency's comprehensive financial management functions, including the release of CMS's Annual Financial Report, as well as the program integrity of Medicare and Medicaid. Prior to becoming the CFO, Tim served as the Deputy Director of the Office of Financial Management. He also served as both the Director and Deputy Director of the Program Integrity Group, in OFM, overseeing CMS' efforts to protect and strengthen the Medicare Trust Funds. Before joining CMS, Tim served in the Executive Office of the President. He was the Deputy Branch Chief for the Health Financing Branch at the Office of Management and Budget where he supported the Administration's policy and budget development process. Mr. Hill has a Master's degree in Public Affairs from the University of Connecticut and a Bachelor of Science degree from Northeastern University.

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