Why agencies break the law on improper payments

Despite an attempted crackdown by the Obama administration, agencies are increasingly likely to make payment mistakes. The error rate rose from 3.53 percent in fiscal 2013 to 4.02 percent in fiscal 2014. In other words, the government misspent about $10 billion more last year than the year earlier.

That we knew, thanks to a Government Accountability Office report issued a few months back. But recent inspector general reports round out the picture by showing where agencies go wrong.

Of the 24 CFO Act agencies — those required to have audited financial statements —about half failed to comply with the law on improper payments, according to a preliminary analysis of the IG reports by the accounting firm Grant Thornton. The low scorers include the agencies that misspent the most money: the departments of Health and Human Services, Treasury, Agriculture and the Social Security Administration.

The overall picture seems, at first glance, worse than in past years, when inspectors general evaluated agencies on a multilevel scale that ranged from "compliant" to "noncompliant." While agencies have made strides in some of their programs, complying with the improper payments law is now pass-fail, thanks to guidance the White House issued in October.

"They're trying to say, ‘No more wiggle room. You're either compliant or not compliant,'" said Grant Thornton Principal Robert Shea.

-Emily Kopp, FederalNewsRadio.com
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Agencies can’t always tell who’s dead and who’s not, so benefit checks keep coming

The U.S. government has a problem with dead people. For one thing, it pays them way too much money.

In the past few years, Social Security paid $133 million to beneficiaries who were deceased. The federal employee retirement system paid more than $400 million to retirees who had passed away. And an aid program spent $3.9 million in federal money to pay heating and air-conditioning bills for more than 11,000 of the dead.

These mistakes are part of a surprising glitch at the heart of the federal bureaucracy. Because of a jury-rigged and outdated system meant to track deaths, the government has trouble determining exactly which Americans are deceased.

As a result, Washington is bedeviled by both the living dead and the dead living.

The task of tracking deaths for the federal bureaucracy is an enormous one; about 2.5 million Americans die each year. Federal officials say the vast majority of these cases are handled correctly: The death is recorded. Government money is no longer sent to that person.

But not always. In fact, glitches in the system have paid more than $700 million to the dead, according to government audits performed since 2008.

The trouble with dead people often begins with something called the Death Master File, which is kept by the Social Security Administration. Every day new reports are added, provided by relatives, funeral homes and the state agencies that issue official death certificates.

The list contains 90 million reports.

The problem is that not all of them are correct.

Now, after years of inattention, President Obama and two senators have laid out ideas to improve the system. In his 2014 budget, Obama requested $22 million to improve the death reports that come in from states by upgrading their systems to transmit faster and more accurate data.

In the Senate, Carper and Sen. Tom Coburn (R-Okla.) have written a bill that would require all federal agencies to check the Death Master File before paying benefits. It would also give all agencies access to the full file, not just the partial one. And it would require new efforts to make sure the data in the file are accurate.

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Government charge card abuse a firing offense under new OMB guidelines

Federal employees who make illegal or improper purchases with government charge cards could face dismissal under new guidelines from the Office of Management and Budget.

In a memo to the heads of agencies, OMB Director Sylvia Burwell laid out new steps to curb charge-card violations as part of the implementation of the 2012 Government Charge Card Abuse Prevention Act.

The law, approved by Congress and signed by President Barack Obama last fall, ordered agencies to firm up internal safeguards for identifying and stopping unauthorized purchases.

By Sept. 30, agencies need to certify to OMB that they have internal controls in place, according to the memo. Agencies are expected to develop specific penalties for employees who violate charge card policies. Employees who make "illegal, improper or erroneous" purchases with government cards should face disciplinary actions, including dismissal, the memo stated.

Burwell has tasked agency human resources and charge card management officials with developing the proper penalties for violations.

OMB's guidelines also instruct agencies to report government charge card violations at least twice a year. The new reporting requirements go into effect this year for agencies that spend more than $10 million annually on charge cards. The semi-annual reports will have to detail all purchase card violations as well as the disciplinary actions taken. The first report is due Jan. 31.

The 2012 law also instructed agency inspectors general to conduct periodic risk assessments on the use of agency charge cards. Agency IGs are now required to compile an annual status report on charge card audit recommendations.

-Jack Moore, FederalNewsRadio.com
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Largest USDA overpayments go toward farm subsidies, report says

The Department of Agriculture doled out more than $20 million in excess financial assistance last year, with the largest overpayments coming in the form of farm subsidies for crop insurance.

In a report released this week, the USDA inspector general said the agency spent nearly $15 million on undue payouts through the Federal Crop Insurance Corporation while issuing no major overpayments for nutrition assistance, including the Supplemental Nutrition Assistance Program — formerly known as food stamps.

Overpayments are defined as payouts that rise at least 50 percent higher than the correct amount while totaling at least $5,000 per individual or $25,000 per organization, according to the analysis.

The watchdog analysis, released Wednesday, focused on the USDA’s compliance with reporting requirements under an executive order President Obama issued in 2009 to reduce high-dollar overpayments.

The Department of Agriculture reported 239 overpayments worth a combined $20.3 million during the 2012 fiscal year, compared to 143 payouts totaling $11.7 million during the previous cycle, according to the review.

Excess payments through the Federal Crop Insurance Corporation averaged excesses of $209,000 per payout. The next highest amount came from a wildland firefighting program that sent out overpayments of $58,000 apiece on average.

The inspector general said the USDA could decrease its overpayments through better control over bookkeeping and stricter adherence to reporting guidelines, including the deadlines for producing quarterly numbers.

The Agriculture Department said in its response that “agencies misinterpreted or deviated from the requirement of the Office of Management and Budget and the [Office of the Chief Financial Officer].” The agency said its CFO would issue a memo directing each department to certify that its reporting processes comply with the established standards.

-Josh Hicks, WashingtonPost.com

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DoD using flawed approach to calculate $1.1B in improper payments

The Defense Department reported making just $1.1 billion in improper payments in fiscal 2011, a small fraction of the Pentagon's total outlays of more than $1 trillion.

But, in a new report, the Government Accountability Office said those estimates are neither reliable nor statistically valid because of "longstanding and pervasive" weaknesses in DoD financial-management practices as well as specific deficiencies in the department's procedures for estimating improper payments.

Lacking in DoD's current efforts to curb improper payments are basic quality-control measures, Asif Khan, GAO's director of financial management and assurance, told In Depth with Francis Rose. (Federal News Radio's DoD Reporter Jared Serbu served as guest host)

-Jack Moore, FederalNewsRadio.com
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Agencies not working together to quell improper payments

The Social Security Administration needs to work with other federal agencies and state government and share data to make sure Social Security payments are made properly, Office of Federal Financial Management Controller Daniel Werfel told the Senate Homeland Security and Governmental Affairs Committee May 8.

Werfel said an example of how agencies can work together is on curbing Supplemental Security Income payments to those people living overseas.

SSI recipients are ineligible when outside the country for more than 30 days.

SSA and the Homeland Security Department should develop a process so that SSA could access DHS-collected travel data on individuals who enter and leave the United States, O'Carroll said. As of April 2013, SSA was pursuing access to this data and developing a database matching agreement, he said.

There has been some success in lower improper payments, though. In fiscal 2012, SSA investigators recovered $96.5 million in SSA restitution and projected $398.5 million in savings from programs such as the Cooperative Disability Investigations initiative, which works with state agencies to detect potential fraud and reduces the number of fraudulent disability payments, O'Carroll said.

Read more: Agencies not working together to quell improper payments - FierceGovernment http://www.fiercegovernment.com/story/agencies-not-working-together-quell-improper-payments/2013-05-09#ixzz2Sp7a0300
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IRS issued billions in improper refunds, report says

The Internal Revenue Service issued more than $11 billion in improper payments through its Earned Income Tax Credit program last year, according to an inspector general’s report released this week.

Treasury Department deputy inspector general Michael McKenney found that the IRS has failed to comply for two consecutive years with the Improper Payments Elimination Act, which President Obama signed in 2010. The law requires federal agencies to reduce erroneous payments to a rate of less than 10 percent.

The IRS estimates that at least 21 percent of its EITC payments in 2012 were faulty. That rate showed a decline compared to the previous nine years, but improper payments over the same period increased about 22 percent, rising to at least $11.6 billion, according to the inspector general’s report.

-Josh Hicks, WashingtonPost.com
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Timeline: The Evolution of Financial Management in the Federal Government

(This interactive timeline is part of Federal News Radio's special report, Rise of the Money People.)

The roots of today's federal financial systems oversight can be traced back to the Accounting and Auditing Act of 1950, which authorized the head of each federal agency to establish internal controls over its assets.

The act also tasked the Government Accountability Office with drawing up accounting standards for agencies and, through audits, ensuring that agency internal controls met those standards.

Over the last three decades, Congress has expanded the scope of financial oversight at agencies, and, with the help of new technology, provided for greater transparency in agencies' fiscal reporting.

This timeline provides an overview of the initiatives introduced by the White House and legislation enacted by Congress to establish greater oversight of government spending.

-Michael O'Connell, FederalNewsRadio.com
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Werfel: New laws could set back transparency efforts

Lawmakers should not pass new legislation that could upend the administration’s progress on making government spending more transparent, said Danny Werfel, controller at the Office of Management and Budget. Werfel told a Senate committee that lawmakers need to seriously think about the impact of new statutes on ongoing efforts to improve government accounting and tracking its money.

The administration has been implementing new laws, such as the Improper Payment Elimination and Recovery Act and another law that updates the Government Performance and Results Act, called the GPRA Modernization Act.

As Congress considers new transparency measures, Werfel offered a key question for senators to ask themselves when considering proposed legislation: Would the new law reinforce current objectives, or would it move the government in different directions?

Nevertheless, transparency legislation is moving through Congress. In April, the House passed by voice vote its Digital Accountability and Transparency Act, or the DATA Act (H.R. 2146). The bill would create the Federal Accountability and Spending Transparency Commission, which is to succeed the board that oversaw spending reports for the 2009 economic stimulus law. In addition, agencies would be required to submit their spending data to a new platform with consistent electronic identifiers and markup language.


-Mathew Weigelt, FCW.com
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OMB hangs hopes on new tools to cut $50B in improper payments

Agencies cut the amount of improper payments by another $5 billion in 2011. But to reach the administration's three-year goal to reduce the amount of improper payments by $50 billion by the end of the year, they will need a lot of help.

"Obviously it's a big year ahead to try to make the President's goal," said Danny Werfel, the controller of the Office of Management and Budget after a House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management hearing on improper payments Tuesday. "The good news is that just about every major program is trending downward."


OMB reported in November the improper payment error rate dropped to 4.7 percent in 2011 from 5.3 percent in 2010.


Over the last two years, the OMB-led effort reduced the amount of improper payments by $20 billion — meaning the government is $30 billion short of Obama's goal.

OMB, the Treasury Department and the Recovery Accountability and Transparency (RAT) Board have several new software and analytical tools in the final stages of testing and will be rolled out to more users this year.


The RAT Board is running a pilot with a small number of agencies who are using the federalaccountability.gov portal. Mike Wood, the board's executive director, said the fraud prevention tool will be expanded to non-Recovery Act spending using funding allocated in the 2012 appropriations bill.


Treasury and OMB are borrowing heavily from the RAT Board's experience and the technologies in its Recovery Operations Center.


Werfel said Treasury is testing tools in its new GoVerify.gov center.

GoVerify.gov is a one-stop portal that provides a variety of data sets making it easy for agencies to search before making contract awards or grants. It will not include every database at first, but Werfel said over time more will be added.

Agencies are under pressure to identify and fix those root causes. The 2010 improper payments bill calls for OMB and Congress to penalize agencies for not improving their improper payments error rate.


Werfel said the first reports to agency inspectors general are due in March.

-Jason Miller, FederalNewsRadio.com
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Senate committee passes bills on improper payments, whistleblower protections

The Senate Homeland Security and Governmental Affairs Committee passed three bills today to combat wasteful spending in government, strengthen federal whistleblower protections and improve interagency communications with a rotational program.



The Improper Payments Elimination and Recovery Improvement Act of 2011 expands on legislation passed last year to eliminate improper payments.

 

The new bill would: 

• Require more consistent reporting of improper payments and eliminate voluntary disclosures by contractors.
• Create a "Do Not Pay List" of contractors who have been convicted of fraud or for a similar reason.
• Improving data on deceased beneficiaries.
• Set up a pilot program that uses private companies to help agencies identify improper payments.

 

-Jolie Lee, FederalNewsRadio.com
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20 years later, CFO Act needs some freshening up

Congress must standardize the role of the federal chief financial officer and give deputy CFOs more clout to make up for time between political appointments of CFOs.


These are two of the recommendations from a multi-agency review of the impact and shortcomings of the CFO Act of 1990. Congress required the analysis as part of the Improper Payments Elimination and Recovery Act of 2010.

"Over the past 20 years, the CFO Act has played a pivotal role in improving financial accountability and transparency across the federal government," wrote Danny Werfel, the Office of Management and Budget controller in a blog post. "The report highlights several benefits of the CFO Act, including the increased transparency, greater accountability and significant improvements in financial management and internal controls achieved in recent years. Last year, these strides contributed to 21 out of the 24 CFO Act agencies obtaining unqualified 'Clean' opinions on their financial statement audits--only the second time in the last decade that the government reached that milestone."

The CFO Act helped agencies strengthen financial controls and processes over the last 20 years. Previously, the report stated financial operations were ineffective and inefficient, weak internal controls left resources at risk, personnel were not adequately trained and financial systems could not communicate with each other and were often redundant. The report said fund balances with the Department of the Treasury were reconciled inconsistently, and the government had difficulty managing its assets and costs. The lack of a full-time centralized senior official overseeing agency funding also caused agencies problems prior to the act.


But one of the big holes the review group found was the lack of continuity among agency financial leaders since most CFOs are political appointees.


The review group recommended to Congress to give deputy CFOs the same breadth of responsibilities as the CFOs.

-Jason Miller, FederalNewsRadio.com
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Senator Carper, others introduce bill to supplement Improper Payments Law

Dover — Senators introduced a bill to bolster the Anti-Wasteful Spending Law, building on the landmark Improper Payments Law signed one year ago.


Sen. Tom Carper, chairman of the subcommittee on federal financial management, introduced legislation that builds on IPERA's initiatives and takes additional steps to identify, prevent and recover improper payments by federal agencies. Senators Joe Lieberman, Susan Collins and Scott Brown join senator Carper as cosponsors.

The Improper Payments Elimination and Recovery Improvement Act of 2011 goes beyond IPERA's goals for curbing agencies' improper payments with three main concepts, including provisions that: expand requirements and strengthen estimates for agencies' improper payments; mandate the establishment of a government-wide "Do Not Pay List;" and require Recovery Audit Contractor(RAC) pilot programs across federal agencies. According to an Office of Management and Budget estimate, federal agencies made nearly $125 billion in improper payments in 2010.

Executive Memo M-11-16: Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123

April 14,2011

M-11-16

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

FROM: JacobJ. Lew, Director, OMB

SUBJECT: Issuance of Revised Parts I and II to Appendix C ofOMB Circular A-123

Each year, the -Federal Government wastes billions of taxpayer dollars on improper payments to individuals, organizations, and contractors. These are payments made in the wrong amount, to the wrong entity, or for the wrong reason. Despite efforts to reduce improper payments, agencies reported an estimated $125 billion in improper payments for Fiscal Year 2010. Whether these payments resulted from inadequate recordkeeping, inaccurate eligibility determinations, inadvertent processing errors, the lack of timely and reliable information to confirm payment accuracy, or fraud, the amount of improper payments is simply unacceptable.

On July 22, 2010, the President signed into law the Improper Payments Elimination and Recovery Act (IPERA; Pub.L. 111-204). IPERA amended the Improper Payments Information Act of 2002 (IPIA; Pub. L. 107-300) and generally repealed the Recovery Auditing Act (Section 831, Defense Authorization Act, for FY 2002; Pub.L. 107-107). IPERA directed the Office of Management and Budget (OMB) to issue implementing guidance to agencies.

OMB is now issuing the attached government-wide guidance on the implementation of IPERA. This guidance is contained in Parts I and II to Appendix C ofOMB Circular A-I23, Management's Responsibility for Internal Controls'.

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