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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Auditors Say Feds Needlessly Wasted $43 Billion

Every year, tens of billions of tax dollars are lost to waste, fraud and abuse within the federal government. But much more could be lost if it wasn't for a team of federal watchdogs tasked with flagging any inefficiencies or wrongdoing within all government programs and projects.

That's according to the Special Council of the Inspectors General on Integrity and Efficiency (CIGIE)—the group in charge of overseeing the 15 presidentially appointed IG's. The group consistently reminds lawmakers of out how the auditors' work saves the federal government billions of dollars each year—despite their annual collective operating budget of over $1 billion. 

This year, CIGIE said that taken together, all of the auditors' recommendations this year would result in about $32 billion in savings, The Washington Examiner first reported. Recommendations typically include telling agencies to ramp up their oversight or come up with a new policy that will help them run more efficiently.

The investigations this year have already resulted in $11 billion that was returned to the Treasury. 

The IG's total operating budget for 2014 was about $1.6 billion, according to CIGIE's financial audit for 2014.

-Brianna Ehley, CNBC.com
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OMB to Alter Guidance for Reducing Improper Payments

Inspectors general are the “best friends” of program managers and the White House budget office when it comes to catching fraud and reducing agency improper payments, the deputy U.S. controller said on Wednesday.

Mark Reger, now in his third month as the No. 2 at the Office of Federal Financial Management, said his team is reworking  Circular A-123 guidance on controlling for financial integrity “to make it less prescriptive and to rely on the people on the ground,” particularly inspectors general.

Reger, a former Maryland State Treasury official, noted that the rate of bad payments has dropped steadily over the past four years, thanks in part to Congress’s enactment of the 2012 Credit Card Fraud Prevention Act and the 2012 Improper Payments Elimination and Recovery Act. “The most important tool is the education of agency enforcers in the field,” he said, praising the watchdogs for gathering better data, working together and sharing information. “I don’t know a single inspector general who isn’t thrilled to find additional money.”

The increasing use of data analytics has allowed progress in such areas as federal employee misuse of credit orthat it’s not okay to steal from federal government, it’s not sexy,” Reger said. purchasing cards, the deputy controller said. “The data is now generated back to the agencies every day,” he said. “Employees found to have committed fraud have had their cards cancelled, or been fired, or disciplined in some fashion.”

Coming changes to the financial controls circular will include requiring fewer reports and more-detailed categories of fraud, or “bucketing,” to distinguish, for example, between an unmerited payment and a claim lacking proper documentation, he said.

Reger urged IGs, program managers and vendors to report fraud to the Government Accountability Office’s fraud line at fraudnet@gao.net, and to peruse their own Medicare bills in search of bad charges.  “Please reinforce that it’s not okay to steal from federal government, it’s not sexy,” Reger said.

- Charles S. Clark, GovExec.com
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IGs overburdened by congressional mandates, survey finds

Few agencies host blow-out conference extravaganzas. And few feds swipe their government charge cards when paying for personal stuff. But all federal inspectors general spend more of their time worrying about that sort of wrongdoing, thanks to new congressional mandates.

IGs say those must-do's are distracting them from enterprising work that could shed light on riskier agency behavior.

A new survey of 28 inspectors general by the Association of Government Accountants and Kearney & Company P.C. shows IGs are concerned about their effectiveness, as they balance work requirements against tight budgets and difficulties in getting needed information.

Along with the online survey, conducted in June, the researchers interviewed a mix of staff at federal IG offices. The researchers delved more deeply into problems uncovered in a similar survey done a year ago.

-Emily Kopp, FederalNewsRadio.com
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Government made $100B in improper payments

WASHINGTON (AP) -- By its own estimate, the government made about $100 billion in payments last year to people who may not have been entitled to receive them -- tax credits to families that didn't qualify, unemployment benefits to people who had jobs and medical payments for treatments that might not have been necessary.

Congressional investigators say the figure could be even higher.

The Obama administration has reduced the amount of improper payments since they peaked in 2010. Still, estimates from federal agencies show that some are wasting big money at a time when Congress is squeezing agency budgets and looking to save more.

Some improper payments are the result of fraud, while others are unintentional, caused by clerical errors or mistakes in awarding benefits without proper verification.

In 2013, federal agencies made $97 billion in overpayments, according to agency estimates. Underpayments totaled $9 billion.

The amount of improper payments has steadily dropped since 2010, when it peaked at $121 billion.

The Obama administration has stepped up efforts to measure improper payments, identify the cause and develop plans to reduce them, said Beth Cobert, deputy director of the White House budget office. 

Agencies recovered more than $22 billion in overpayments last year.

-Stephen Ohlemacher, Associated Press/FederalNewsRadio.com
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OMB and GSA developing unified measures to cut down on costs

The Office of Management Budget and the General Services Administration have created a plan to gather data and make progress toward cutting unnecessary spending and inefficiency.

Currently, OMB and GSA have trouble analyzing the efficiency of government agencies, something that makes agency cooperation difficult, according to a White House report released June 30.

OMB and GSA will create a unified data set from all agencies.

The plan revolves around agencies setting performance benchmarks, which the report expects to be completed by the end of July. The benchmarks, then, are assessed by OMB and GSA, which will compare the practices used by the most efficient agencies and share them with the others. Leadership teams from agencies then will meet with OMB and GSA to share their findings.

OMB and GSA are looking for efficiency indicators, measured in cost savings or reduced square footage of federal property, which can be traced back to benchmark related actions. OMB and GSA also are looking for increased service quality and shared services adoption among agencies.

Based on the findings, finance, human resources and IT working groups will come up with an action and implementation plan, which interagency management councils will analyze for effective strategies that could be shared. This all comprises the first phase of the plan. The second phase uses the results of the first to create a standard plan and metrics.

The benchmarks policy set by OMB and GSA is the latest in a series of actions implemented by the Obama administration to decrease waste, fraud and abuse. Since 2009, the administration has been trying to reform real estate policies and improper payments.

Under the Freeze the Footprint initiative, OMB required agencies to submit three-year Revised Real Property Cost Savings and Innovation Plans to more narrowly focus on how they can maintain their real estate footprint and include a prospective analysis of spending.

In 2010, agencies paid $125 billion in improper payments, whether by contractor fraud or paying more than $1 billion to dead people.

Congress passed a law requiring Treasury to create a "do not pay" list of fraudulent contractors and a tool to let death certificate data be shared more easily among agencies.

The improper payment rate has dropped to 3.54 percent in 2013 from 5.42 percent in 2009.

The Obama administration has set new cross-agency priority goals for managing government as part of its 2015 budget. Federal News Radio examines the eight areas identified by the White House in our special section 2014 Cross Agency Priority Goals.

-Ariel Levin-Waldmen, FederalNewsRadio.com
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Watchdog: Government Still Has Big Financial Management Problems

The usefulness of the government’s consolidated financial statements, though improved in recent years, remains hampered by “material weaknesses,” primarily at the departments of Defense and Health and Human Services, that prevent auditors from rendering an audit opinion, the Government Accountability Office reported.

In its mandatory audit of the government’s fiscal 2013 and fiscal 2012 consolidated financial statements released Thursday, the congressional watchdog pointed to three issues affecting the government’s estimate of its assets, liabilities and costs that urgently need improvement. They include “serious financial management problems” at the Defense Department; a governmentwide inability to adequately account for and reconcile intragovernmental activity and balances between federal entities; and an “ineffective process” for preparing the consolidated financial statements.

GAO noted that the Pentagon accounts for about 33 percent of the government’s total assets and about 16 percent of fiscal 2013 spending, but the agency has been given a “disclaimer of opinion” on its consolidated financial statements. Similarly, uncertainties in the growth rate of Medicare and Social Security, which account for 68.8 percent of the value of future expenditures in excess of future revenue, are responsible for HHS’ disclaimer of opinion.

Further crimping the government’s broader ability to get a grip on finances is an inability to determine the full extent of improper payments and actions to prevent them; unresolved information security control deficiencies; and effective management of tax collection activities, GAO said.

-Charles S. Clark, GovExec.com
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Werfel resigns from OMB

Danny Werfel, an influential player in efforts to improve federal financial management, and who also ran the IRS for much of last year, has resigned from his post as Office of Management and Budget controller and left federal service, an OMB spokesman confirmed.

Werfel stepped down effective Dec. 31, Frank Benenati said in an email. His low-key departure was not announced at the time and President Obama has not yet nominated a replacement for the Senate-confirmed position. In the meantime, Deputy Controller Norman Dong is serving as interim controller. Werfel, a career federal employee who had been controller since October 2009, could not be reached for comment.

Werfel was closely involved in the White House’s campaign to reduce improper federal payments and helped create the Treasury Department’s Office of Financial Innovation and Transformation, which seeks to move agencies toward more use of shared financial management services. Last May, Obama tapped him to temporarily lead the IRS after the previous acting commissioner left amid an uproar over an inspector general’s finding that the agency used “inappropriate criteria” for evaluating conservative groups seeking tax-exempt status.

While Werfel had been expected to stay as acting IRS commissioner only through the end of the fiscal year in September, he served until last month, when John Koskinen was confirmed as the agency’s permanent head.

Werfel, who regularly represented OMB at congressional hearings, also enjoyed cordial relationships with lawmakers of both parties.

-Sean Reilly, FederalTimes.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.

-David A. Fahrenthold, WashingtonPost.comREAD MORE...

AGA Executive Reports Address Shared Service and Improper Payment Reduction Strategies

AGA released two reports identifying specific steps that all levels of government can take to get more for their money, promote program excellence and reduce improper payments. The papers summarize two special sessions conducted this summer during AGA's training event in Dallas.

One session examined lessons learned by governments at the forefront of implementing shared service arrangements; the other explored the feasibility of developing a common strategy to reduce improper payments across all levels of government.

The reports, entitled, "Envisioning and Realizing the Promises of Shared Services," and "Reducing Improper Payments through Collaboration," are available in AGA's Thought Leadership Library.

The sessions revealed that shared services can be used to accomplish critical government objectives, including efforts to mitigate improper payments. AGA Executive Director Relmond P. Van Daniker explained that a number of federal databases are actually shared services that help states mitigate improper payments by improving their ability to determine program eligibility and payment amounts.

For example, "the National Directory of New Hires maintained by the U.S. Department of Health and Human Services, helps states mitigate improper payments," Van Daniker said. "The national directory allows state agencies to match new hires, reported by employers, with individuals owing child support. It further helps state agencies reduce unlawful or erroneous public assistance payments, including payments for welfare, Supplemental Nutrition Assistance Program (formerly food stamps) and Medicaid payments."

In a similar vein, the Treasury Offset Program (TOP) is a shared service that collects delinquent debts owed to federal agencies or states. Jeffrey Schramek, U.S. Department of the Treasury(Treasury), spoke during each session, alluded to the success of TOP. Under TOP, federal agencies and states can offset delinquent debts - including overpayments -against appropriate federal and state payments. "TOP's successful state program recovered more than $3 billion for the states, alone, in 2012," said Schramek.

Arizona Comptroller, Clark Partridge, co-chair of AGA's Intergovernmental Partnership, highlighted how AGA's intergovernmental ToolKits and guides help to reduce improper payments. During the session on improper payments, Partridge identified the Intergovernmental Partnership's Cooperative Audit Resolution and Oversight Initiative guide as an excellent resource to reduce improper payments by determining the underlying cause of audit findings. AGA's ToolKits and guides are available online and are free to use.

Cooperation, and the ability to agree on a shared mission, is fundamental to developing successful shared-service arrangements, according to Dan Murrin, Partner, Ernst & Young (EY). EY sponsored the session on shared services and Murrin moderated the session on improper payments.

Murrin said that governments can be more successful in mitigating improper payments by working together. 

"Governments can develop shared systems that help verify eligibility and payment amounts," Murrin said. "There are opportunities to establish regional eligibility systems and to develop 21st-century cooperative arrangements that leverage investments made by governments." Murrin added that the use of shared services provides opportunities to standardize processes and improve governments' ability to work together in preventing improper payments.

Richard Gregg, Treasury's Fiscal Assistant Secretary, issued a challenge to government financial officials while closing the session on shared services, "The benefits of shared services are too large for us to ignore as a government." Gregg further stated, "To realize the cost savings and the better flow of information that can be derived from shared services, the government accountability community must develop the courage to act and make a commitment to change."

According to Van Daniker, AGA will build on information contained in the reports to forge alliances among officials at all levels of government in an effort to improve government performance and increase accountability.

AGA Publishes 2013 Federal CFO Survey Results

CFOs: Something's Gotta Give

Survey on federal financial executives shows struggle to achieve results in the face of increasing requirements and a demoralized workforce

Continuing to provide adequate services in the face of unprecedented across-the-board cuts; a declining, dispirited workforce; and growing financial and other management requirements is the top concern of federal Chief Financial Officers (CFOs), according to the 18th annual Federal CFO Survey conducted by the Association of Government Accountants (AGA) in partnership with Grant Thornton LLP.

CFOs crave a clear and consistent framework that helps them set priorities and accomplish goals important to their leadership. Unless a new, focused management agenda is put in place, CFOs fear they can't continue to meet growing requirements in the face of extraordinary challenges.

When asked about their greatest challenges, almost a third of financial executives interviewed and a quarter of those who responded on-line said the services they provide are at risk in the face of growing requirements and declining resources, including people. "Government needs to adjust expectations based on the funding it has. Government can do all the old jobs poorly, or it can do the new jobs well," noted AGA Executive Director, Relmond Van Daniker. He continued, "CFOs cited many serious short- and long-term challenges. However, they are in a position to lead their agencies and the government as a whole to sustainable solutions to these challenges."

Other findings of the survey illuminated the challenges facing CFOs. They met the data quality and reporting challenges of the Recovery Act, but they do not see lasting benefits from those transparency efforts. Internal control activities produce benefits, but their application appears focused on financial reporting rather than program performance. CFOs embraced major Administration initiatives like the Campaign to Cut Waste and Reducing Improper Payments, but because they have to implement the mother-of-all across the board cuts, more mature cost management is lacking.

AGA and Grant Thornton conducted in-person interviews with more than 100 U.S. federal financial leaders and senior leaders of oversight groups such as the Office of Management and Budget (OMB). Approximately half of these interviewees had job titles of CFO or Deputy CFO; others were direct reports or other financial executives. Almost 200 other federal financial leaders participated in an online survey. Both online and in-person survey instruments included closed and open-ended questions. AGA and Grant Thornton have conducted this survey annually since 1996.

The report is the product of AGA's Corporate Partner Advisory Group (CPAG) research project sponsored by Grant Thornton LLP. The project leader for this research report was Denise Lippuner, CPA.

READ THE REPORT HERE...

OMB following a familiar path as it shapes new financial internal controls

The Office of Federal Financial Management is taking a page out of the cybersecurity reform book in how it's changing how agencies oversee spending.

OFFM is updating its Circular A-123 guidance to be more like the future vision of cybersecurity — based on risk and data, and done more than every three years.

Mike Wetklow, the chief of the accountability performance branch at OFFM in the Office of Management and Budget, said there are several guiding principles going into the revision, including integrating an internal controls framework, reducing the compliance burdens and innovation through data analysis.

"Many of these principles we are putting in practice, we're going to have examples of charge cards, improper payments and data analytics," said Wetklow during a panel discussion at the Association of Government Accountant's Internal Control and Fraud Prevention Training event Tuesday in Washington. "We have a lot of things we are trying to do differently like, for example, with Hurricane Sandy last year. There was a memo earlier in the year about internal control plans. A lot of our discussions were we didn't want to make this a new Recovery Act or have this big compliance exercise right in the middle of disaster response, but to really use the internal controls as a risk management tool. We didn't ask agencies to document their control environment, the risk assessment, the control activities, the full gauntlet of all those things. We asked them to simply do a thoughtful analysis of their risks that came about from the extra funding that went into their programs, and just work with OMB on that."

Federal financial management and cybersecurity policy face similar challenges. Both need to keep up with the changing environment and expectations, and move from a static to a dynamic approach.

Like FISMA, A-123 turned into a static process.

A-123 is a 30-plus-year-old policy from OMB regarding how agencies, and specifically CFOs and their budget staffs, handle the oversight of money, otherwise known as internal controls. Internal controls ensure agencies meet policy and legislative requirements for financial reporting and the effectiveness and efficiency of programs.

OMB last revised A-123 in 2004 after Congress passed the Sarbanes-Oxley bill.

Experts say this latest set of changes is part of the pendulum that seems to swing every decade or so between more or less reporting requirements.

He said one of the biggest changes is what is being added to A-123 to meet the intent and spirit of Congress when it wrote the Federal Financial Management and Improvement Act (FFMIA).

"In the near term, and this will be literally in a couple of weeks, we plan to rescind OMB Circular A-127 and replace it with a new Appendix D to A-123," Wetklow said. "And if you ask yourself, why A-123? When you read the committee report [to FFMIA], it talks a little about financial systems. It talks more about internal controls, business processes, and visibility into government operations. Our hope in what we are doing is we are going to reduce compliance burdens by getting rid of all of these complicated checklists that only serve to drive system's costs and risks, and integrate our processes with the already existing things in A-123."

A-127 addresses financial management system requirements. OMB slowly has been moving away from strict financial management system requirements, and focusing more on standards and outcomes over the last decade.

He said A-123 also will need to be integrated with several other initiatives including new credit card abuse guidance OMB issued last week, improper payment laws that includes the Do Not Pay list and other changes to financial oversight that have come over the past 10 years.

-Jason Miller, FederalNewsRadio.com
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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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CFOs exercise new muscle to impact agency performance - FEDCFO.com Quoted for Story

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

Federal chief financial officers were responsible for $1.2 trillion in federal spending in 1990. Now it's $3.8 trillion. CFOs today not only face a larger budget, but one that is more complex.

Does that mean the law that created the position of federal chief financial officers 23 years ago, needs to be updated? Has the CFO Act fallen behind the times? And, have agencies met the spirit and intent of the law?

The answers almost across the board from experts in and out of government are: No. No. And, yes.

As part of Federal News Radio's week-long on-air and online special report, " Rise of the Money People: Financial management moves front and center as agencies make the final assault on wasted billions," we explore just how well the CFO Act has survived over the last two-plus decades, and how federal CFOs have morphed from number crunchers to master analyzers of data to help agencies make better decisions.

"I think there is an opportunity to evolve our financial management model and compliance framework in a way that we are moving beyond the basics of financial statements, and moving directly into a space where the CFO sees across government significant discipline and consistency in how we are tackling some of the other elements of the bottom line of government," said Danny Werfel, the controller in the Office of Management and Budget, a position akin to that of the federal CFO.

"We have to be branching out in to more areas of discipline that get at that citizens' bottom line and get more in the areas of financial performance. What happens is CFOs are branching out today in many, many different ways. The issue is whether the framework which they operate under, how they are audited, how they are capturing that information and reporting it publicly, is that following suit and being aligned with CFOs emerging responsibilities around these bottom line issues of citizens' trust in government, program and financial performance, fraud, error and waste."

The framework Werfel is referring to is the CFO Act.

Congress passed it and President George H.W. Bush signed it into law in 1990. It created the position of CFO in the major agencies and instituted the requirement for strong internal controls.

Twenty-three years later, experts in and out of government say agencies have met both the spirit and intent of the law. And now, CFOs are evolving beyond the initial requirements of the law.

Part of the expanded role CFOs play is derived from several of the administration's priorities, such as reducing improper payments and better managing real property.

But the factor that will influence most how CFOs affect federal agency performance is enabled by the growing use of financial data to make better decisions.

"We now have managers of financial information versus processors of financial information in our CFO community," said Doug Davidson, vice president of TFC Consulting and publisher of the financial management blog, FedCFO.com. "And agencies are able to act upon the information they have in front of them versus looking back strictly for auditability."

Davidson said the evolution has been slow, mostly taking place in the last five- to-seven years. But now, financial managers have a much better grasp on where their agency is spending money, and the impact that spending is having on performance and services.

Werfel said the ability of CFOs to impact agency decision making is more important than ever in today's budget climate.

-Jason Miller, FederalNewsRadio.com
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GAO: the Army payroll system is a mess

If you’ve been on Army active duty during the past couple of years, you might want to take another look at your pay stubs. The Government Accountability Office today released a report (GAO-13-28) that detailed major problems with the Army’s $47 billion annual military payroll accounts.

The agency found that the Army “is unable to track and collect data on pay errors for active duty soldiers that occur due to over payments, under payments, data entry errors and fraud,” according to a bipartisan statement issued jointly by Sens. Tom Carper, D-Del., Tom Coburn, R-Okla., Scott Brown, R-Mass., Claire McCaskill, D-Mo., and Reps. Darrell Issa, R-Calif., Edolphus Towns, D-N.Y., and Todd Platts, R-Pa.

GAO found a lot of errors, and said many “went undetected for lengthy periods of time, including some that were not detected for up to 2 years or until the soldier left the Army.”

-Bill McMichael, Delaware Online
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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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