This is the accessible text file for GAO report number GAO-07-533R 
entitled 'Improper Payments: Posthearing Responses on a December 5, 
2006, Hearing to Assess the Improper Payments Information Act of 2002' 
which was released on February 27, 2007. 

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February 27, 2007: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable Tom Coburn: 
Ranking Member: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Subject: Improper Payments: Posthearing Responses on a December 5, 
2006, Hearing to Assess the Improper Payments Information Act of 2002: 

On December 5, 2006, we testified[Footnote 1] before your subcommittee 
at a hearing entitled, "An Assessment of Improper Payments Information 
Act of 2002." At the end of the hearing, the subcommittee asked us to 
provide information regarding (1) barriers inhibiting agencies' efforts 
to prevent and reduce improper payments, (2) legislative reforms needed 
to facilitate agencies' efforts to prevent improper payments, and (3) 
suggested language to amend the Improper Payments Information Act of 
2002 (IPIA) that would provide more complete disclosure and 
transparency of agencies' improper payments reporting. 

First, we identified several key barriers that agencies encounter in 
their quest to reduce improper payments, such as the inability to share 
data and restrictions in the program's administration. In some cases, 
legislation limits the type of information that can be shared among 
agencies to verify data provided by applicants for government programs 
or benefits or to make eligibility decisions. For example, we 
reported[Footnote 2] in November 2006 that the Department of Education 
reported that section 6103 of the Internal Revenue Code concerning 
confidentiality of the tax return information precludes data matching. 
We also reported[Footnote 3] in October 2005 that the United States 
Citizenship and Immigration Services, a component of the Department of 
Homeland Security (DHS) reported that it was not authorized to receive 
taxpayer information from the Internal Revenue Service (IRS) directly 
to determine eligibility for immigration benefits. Barriers related to 
program administration involve some aspect of an agency's current 
program structure that limits its actions to prevent or reduce improper 
payments. However, the agency can take steps to modify current program 
operations to help prevent improper payments. For example, we 
recommended[Footnote 4] in June 2006 that DHS enter into an agreement 
with other agencies, such as the Social Security Administration, to 
periodically authenticate information contained in the Individuals and 
Households Program registrations to prevent individuals from applying 
for assistance using Social Security numbers that were never issued or 
belonged to deceased or other individuals. 

Second, regarding legislative reforms, the Budgets of the U.S. 
Government for Fiscal Years 2008 and 2007 include proposed actions to 
facilitate better measurement and detection of improper payments. We 
continue to support the administration's proposed legislative reforms 
that assist agency action to reduce improper payments, such as imposing 
penalties for fraud, improving benefit coordination between agencies, 
and simplifying eligibility requirements. Specifically, since fiscal 
year 2000, our recommendations have been aimed at raising the level of 
attention given to improper payments, including annually estimating, 
reporting, and reducing improper payments for agencies' programs. Our 
work on governmentwide improper payments and issuance of our executive 
guide on strategies to manage improper payments[Footnote 5] led to the 
passage of IPIA. The act requires that executive branch agency heads 
identify programs and activities susceptible to significant improper 
payments, estimate amounts improperly paid, and annually report 
improper payment estimates and actions to reduce them. 

For example, the Budget of the U.S. Government for Fiscal Year 2008 
includes legislative reforms related to the Department of the 
Treasury's Earned Income Tax Credit (EITC) and Child Tax Credit 
programs, which are intended to clarify the uniform definition of 
child, simplify the EITC eligibility rules, and reduce the computation 
complexity of the refundable Child Tax Credit. According to the Office 
of Management and Budget (OMB), if enacted, the proposal would save 
$392 million in the first year and $6.5 billion over 10 years.[Footnote 
6] We have raised similar issues regarding the complexity of the EITC 
program in previous reports and testimonies[Footnote 7] and since 1995, 
have designated the EITC program as a high-risk area. In our January 
2007 high-risk series update,[Footnote 8] we reported that the IRS and 
the Congress will need to develop and IRS will need to execute multiple 
strategies over a sustained period, including simplifying the tax code 
or specific code sections. 

Lastly, we reported[Footnote 9] in November 2006 that OMB's broad 
implementation of IPIA's general criteria to identify risk-susceptible 
programs limits the disclosure and transparency of governmentwide 
improper payments. This limitation does not further the objectives of 
IPIA, as programs that do not meet OMB's criteria of exceeding $10 
million and 2.5 percent of program payments are excluded from agencies' 
improper payment reporting. For example, one agency identified three 
programs with estimated improper payments exceeding $10 million, but 
because the estimates did not exceed 2.5 percent of program outlays, 
they were not included in the governmentwide improper payments total. 
In our November 2006 report, we recommended that the Congress consider 
amending existing IPIA provisions to define specific criteria, such as 
a minimum dollar threshold, agencies should use to identify which 
programs and activities are susceptible to significant improper 
payments. The enclosure includes our suggested language for amending 
IPIA for better transparency and disclosure of improper payments 
reporting. 

This report is available on GAO's Web site at http://www.gao.gov. 
Should you have any questions on matters discussed in this report or 
need additional information, please contact McCoy Williams, Director, 
at (202) 512-9095 or williamsm1@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. Major contributors to this report are Carla Lewis, 
Assistant Director; Donell Ries; and Chris Rodriguez. 

Signed by: 

David M. Walker: 
Comptroller General of the United States: 

Enclosure: 

Draft Bill Language To Amend The Improper Payments Information Act: 

Sec. _____. Subsection (d) of section 2 of Public Law 107-300 (31 
U.S.C.  3321 note) is amended by inserting after paragraph (3) the 
following new paragraph: 

"(4) SIGNIFICANT.----For purposes of subsection (a), the term 
"significant" means annual improper payments under a program or 
activity that exceed $10 million." 

Draft Report Language: 

The Improper Payments Information Act of 2002 (IPIA) states that agency 
heads must review their agencies' programs and activities to determine 
those that are susceptible to significant improper payments. The law 
does not currently define what programs or activities are susceptible 
to significant improper payments. In its implementing guidance, OMB 
directed that a program or activity is susceptible to significant 
improper payments if it meets two criteria--potential improper payments 
exceeding $10 million and 2.5 percent of program payments. Therefore, 
both criteria must be met for an agency to subject the program to the 
later steps requiring the agency to estimate improper payments and 
address the various improper payment reporting requirements. Using 
OMB's criteria could materially affect the extent to which agencies 
report improper payment information in their performance and 
accountability reports. This section would amend IPIA to define, for 
purposes of identifying what programs or activities are susceptible to 
improper payments, the term "significant" to mean "annual improper 
payments under a program or activity that exceed $10 million." This 
amendment will result in more complete disclosure and transparency of 
governmentwide improper payment reporting. 

(195111): 

FOOTNOTES 

[1] GAO, Improper Payments: Incomplete Reporting under the Improper 
Payments Information Act Masks the Extent of the Problem, GAO-07-254T 
(Washington, D.C.: Dec. 5, 2006). 

[2] GAO, Improper Payments: Agencies' Fiscal Year 2005 Reporting under 
the Improper Payments Information Act Remains Incomplete, GAO-07-92 
(Washington, D.C.: Nov. 14, 2006). 

[3] GAO, Taxpayer Information: Options Exist to Enable Data Sharing 
Between IRS and USCIS but Each Presents Challenges, GAO-06-100 
(Washington, D.C.: Oct. 11, 2005). 

[4] GAO, Expedited Assistance for Victims of Hurricanes Katrina and 
Rita: FEMA's Control Weaknesses Exposed the Government to Significant 
Fraud and Abuse, GAO-06-655 (Washington, D.C.: June 16, 2006). 

[5] GAO, Strategies to Manage Improper Payments: Learning From Public 
and Private Sector Organizations, GAO-02-69G (Washington, D.C.: October 
2001). 

[6] We have not independently assessed OMB's proposed legislative 
reforms and related projected savings included in the Budgets of the 
U.S. Government for Fiscal Years 2008 and 2007. 

[7] GAO, Tax Gap: Multiple Strategies, Better Compliance Data, and Long-
Term Goals Are Needed to Improve Taxpayer Compliance, GAO-06-208T 
(Washington, D.C.: Oct. 26, 2005), and Tax Compliance: Better 
Compliance Data and Long-term Goals Would Support a More Strategic IRS 
Approach to Reducing the Tax Gap, GAO-05-753 (Washington, D.C.: July 
18, 2005). 

[8] GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: 
January 2007). 

[9] GAO-07-92. 

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