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Testimony: 

Before the Subcommittee on Federal Financial Management, Government 
Information, and International Security, Committee on Homeland Security 
and Governmental Affairs, U.S. Senate: 

For Release on Delivery Expected at 2:30 p.m. EST Thursday, March 9, 
2006: 

Financial Management: 

Challenges Remain in Meeting Requirements of the Improper Payments 
Information Act: 

Statement of McCoy Williams, Director, Financial Management and 
Assurance: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-482T]

GAO Highlights: 

Highlights of GAO-06-482T, a testimony before the Subcommittee on 
Federal Financial Management, Government Information, and International 
Security, Committee on Homeland Security and Governmental Affairs, U.S. 
Senate: 

Why GAO Did This Study: 

Improper payments are a long-standing, widespread, and significant 
problem in the federal government. The Congress enacted the Improper 
Payments Information Act of 2002 (IPIA) to address this issue. Fiscal 
year 2005 marked the second year that federal agencies governmentwide 
were required to report improper payment information under IPIA. One 
result of IPIA has been increased visibility over improper payments by 
requiring federal agencies to identify programs and activities 
susceptible to improper payments, estimate the amount of their improper 
payments, and report on the amounts of improper payments and their 
actions to reduce them in their annual performance and accountability 
reports (PAR). 

GAO was asked to testify on the progress being made by agencies in 
complying with requirements of IPIA and the magnitude of improper 
payments. As part of the review, GAO looked at (1) the extent to which 
agencies have performed risk assessments, (2) the annual amount of 
improper payments estimated, and (3) the amount of improper payments 
recouped through recovery audits. 

What GAO Found: 

The federal government continues to make progress in identifying 
programs susceptible to the risk of improper payments in addressing the 
new IPIA requirements. At the same time, significant challenges remain 
to effectively achieve the goals of IPIA. The 32 fiscal year 2005 PARs 
GAO reviewed show that some agencies still have not instituted 
systematic methods of reviewing all programs and activities, have not 
identified all programs susceptible to significant improper payments, 
or have not annually estimated improper payments for their high-risk 
programs as required by the act. 

The full magnitude of the problem remains unknown because some agencies 
have not yet prepared estimates of improper payments for all of their 
programs. Of the 32 agencies reviewed, 18 reported over $38 billion of 
improper payments in 57 programs. This represented almost a $7 billion, 
or 16 percent, decrease in the amount of improper payments reported by 
17 agencies in fiscal year 2004. However, as shown in the table below, 
the governmentwide improper payments estimate does not include 7 major 
agency programs with outlays totaling about $228 billion. 

Major Programs That Have Not Reported Improper Payment Estimates: 

[See PDF for image] 

Sources: Office of Management and Budget and cited agencies’ fiscal 
year 2005 PARs. 

[End of table] 

Further, agency auditors have identified major management challenges 
related to agencies’ improper payment estimating methodologies and 
significant internal control weaknesses for programs susceptible to 
significant improper payments. In addition, two agency auditors cited 
noncompliance with IPIA in their annual audit reports. 

For fiscal year 2005 PARs, agencies that entered into contracts with a 
total value exceeding $500 million annually were required to report 
additional information on their recovery audit efforts. Nineteen 
agencies reported reviewing over $300 billion in vendor payments, 
identifying approximately $557 million to be recovered, and actually 
recovering about $467 million. 

www.gao.gov/cgi-bin/getrpt?GAO-06-482T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact McCoy Williams at (202) 
512-9095 or williamsm1@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the governmentwide problem of 
improper payments in federal programs and activities.[Footnote 1] Our 
work over the past several years has demonstrated that improper 
payments are a long-standing, widespread, and significant problem in 
the federal government. The extent of the problem initially had been 
masked because only a limited number of agencies reported their annual 
payment accuracy rates and estimated improper payment amounts prior to 
the passage of the Improper Payments Information Act of 2002 
(IPIA).[Footnote 2] 

Fiscal year 2005 marked the second year that federal agencies 
governmentwide were required to report improper payment information 
under IPIA in their performance and accountability reports (PAR). IPIA 
has increased visibility over improper payments to a higher, more 
appropriate level of importance by requiring executive agency heads, 
based on guidance from the Office of Management and Budget 
(OMB),[Footnote 3] to identify programs and activities susceptible to 
significant improper payments, estimate amounts improperly paid, and 
report on the amounts of improper payments and their actions to reduce 
them. Further, in fiscal year 2005, OMB began to separately track the 
elimination of improper payments under the President's Management 
Agenda (PMA). 

As reported in agencies' fiscal year 2005 PARs, the governmentwide 
improper payments estimate for fiscal year 2005 exceeded $38 billion, 
but did not include some of the highest risk programs, such as Medicaid 
with outlays exceeding $181 billion for fiscal year 2005. I highlight 
these omissions later in my testimony. From our review, we noted that 
federal agencies made progress in addressing improper payments by 
implementing processes and controls to identify, estimate, and reduce 
improper payments. For example, agencies demonstrated improved error 
detection and measurement by reporting improper payment estimates for 
17 newly reported programs[Footnote 4] totaling about $1.2 billion, 
which are included in the governmentwide improper payments estimate 
totaling over $38 billion. However, we noted that some agencies still 
have not instituted systematic methods of reviewing all programs and 
activities, have not identified all programs susceptible to significant 
improper payments, or have not annually estimated improper payments for 
their high-risk programs. 

Because of ongoing interest in addressing the governmentwide improper 
payments issue, we continue to report on the progress being made by 
agencies in complying with certain requirements of IPIA. A list of 
related GAO products is provided at the end of this testimony. As you 
requested, in my testimony today, I will discuss (1) the extent to 
which agencies have performed the required assessments to identify 
programs and activities that are susceptible to significant improper 
payments, (2) the annual amount of improper payments estimated by the 
reporting agencies, and (3) the amount of improper payments recouped 
through recovery audits. 

The scope of our review included the 35 federal agencies[Footnote 5] 
that the Department of the Treasury (Treasury) determined to be 
significant to the U.S. government's consolidated financial statements. 
Based on available information, we reviewed improper payment 
information reported by 32 agencies[Footnote 6] in their fiscal year 
2005 PARs or annual reports. We further reviewed OMB guidance on 
implementation of IPIA and its report on the results of agency-specific 
reports, significant findings, agency accomplishments, and remaining 
challenges. We did not independently validate the data that agencies 
reported in their PARs or annual reports or that OMB reported. However, 
we are reporting it in order to provide descriptive information that 
will inform interested parties about the magnitude of governmentwide 
improper payments and other improper payments related information. We 
believe the data to be sufficiently reliable for this purpose. We 
provided the major findings discussed in this statement to OMB; 
however, they had not provided official comments by the date of this 
hearing. We conducted our work in February 2006 in accordance with 
generally accepted government auditing standards. 

Background: 

Before I discuss our review of agencies' fiscal year 2005 PARs, I would 
like to summarize IPIA, related OMB initiatives, and statutory 
requirements for recovery audits. The act, passed in November 2002, 
requires agency heads to review their programs and activities annually 
and identify those that may be susceptible to significant improper 
payments. For each program and activity agencies identify as 
susceptible, the act requires them to estimate the annual amount of 
improper payments and submit those estimates to the Congress. The act 
further requires that for programs for which estimated improper 
payments exceed $10 million, agencies are to report annually to the 
Congress on the actions they are taking to reduce those payments. 

The act requires the Director of OMB to prescribe guidance for federal 
agencies to use in implementing IPIA. OMB issued guidance in May 
2003[Footnote 7] requiring the use of a systematic method for the 
annual review and identification of programs and activities that are 
susceptible to significant improper payments. The guidance defines 
significant improper payments as those in any particular program that 
exceed both 2.5 percent of program payments and $10 million annually. 
It requires agencies to estimate improper payments annually using 
statistically valid techniques for each susceptible program or 
activity. For those agency programs determined to be susceptible to 
significant improper payments and with estimated annual improper 
payments greater than $10 million, IPIA and related OMB guidance 
require each agency to report the results of its improper payment 
efforts for fiscal years ending on or after September 30, 2004. OMB 
guidance requires the results to be reported in the Management 
Discussion and Analysis section of the agency's PAR. 

In August 2004, OMB established Eliminating Improper Payments as a new 
program-specific initiative under the PMA. This separate improper 
payments PMA program initiative began in the first quarter of fiscal 
year 2005. Previously, agency efforts related to improper payments were 
tracked along with other financial management activities as part of the 
Improving Financial Performance initiative of the PMA. The objective of 
establishing a separate initiative for improper payments was to ensure 
that agency managers are held accountable for meeting the goals of IPIA 
and are therefore dedicating the necessary attention and resources to 
meeting IPIA requirements. With this new initiative, 15 agencies are to 
measure their improper payments annually, develop improvement targets 
and corrective actions, and track the results annually to ensure the 
corrective actions are effective. 

In August 2005, OMB revised Circular No. A-136, Financial Reporting 
Requirements, and incorporated IPIA reporting details from its May 2003 
IPIA implementing guidance. Among other things, OMB Circular No. A-136 
includes requirements for agencies to report on their risk assessments; 
annual improper payment estimates; corrective action plans; and 
recovery auditing efforts, including the amounts recovered in the 
current year. Section 831 of the National Defense Authorization Act for 
Fiscal Year 2002[Footnote 8] contains a provision that requires all 
executive branch agencies entering into contracts with a total value 
exceeding $500 million in a fiscal year to have cost-effective programs 
for identifying errors in paying contractors and for recovering amounts 
erroneously paid. The legislation further states that a required 
element of such a program is the use of recovery audits and recovery 
activities. The law authorizes federal agencies to retain recovered 
funds to cover in-house administrative costs as well as to pay 
contractors, such as collection agencies. Agencies that are required to 
undertake recovery audit programs were directed by OMB to provide 
annual reports on their recovery audit efforts, along with improper 
payment reporting details[Footnote 9] in an appendix to their PARs. 

The fiscal year 2005 PARs, the second set of reports representing the 
results of agency assessments of improper payments for all federal 
programs, were due November 15, 2005. In our December 2005 
report[Footnote 10] on the U.S. government's consolidated financial 
statements for the fiscal years ended September 30, 2005 and 2004, 
which includes our associated opinion on internal control, we reported 
improper payments as a material weakness in internal control. 
Specifically, we reported that while progress had been made to reduce 
improper payments, significant challenges remain to effectively achieve 
the goals of IPIA. 

Some Agencies Still Have Not Assessed All Programs and Activities for 
Risk of Improper Payments: 

We reviewed the fiscal year 2005 PARs or annual reports for 32 of the 
35 federal agencies that the Treasury determined to be significant to 
the U.S. government's consolidated financial statements. Of those 32 
agencies, 23 reported that they had completed risk assessments for all 
programs and activities. See appendix II for detailed information on 
each agency. This was the same number of agencies that reported having 
completed risk assessments in our prior year review.[Footnote 11] The 
remaining 9 agencies either were silent on IPIA reporting details in 
their PARs or annual reports or had not yet assessed the risk of 
improper payments for all their programs. 

In addition, we noted that selected agency auditors reviewed agencies' 
risk assessment methodologies and identified issues of noncompliance or 
other deficiencies. For example, auditors for the Departments of 
Justice and Homeland Security cited agency noncompliance with IPIA in 
their fiscal year 2005 annual audit reports, primarily caused by 
inadequate risk assessments. The Department of Justice auditor stated 
that one agency component had not established a program to assess, 
identify, and track improper payments. The agency acknowledged this 
noncompliance in its PAR as well. The Department of Homeland Security 
(DHS) auditor reported that the department did not institute a 
systematic method of reviewing all programs and identifying those it 
believed were susceptible to significant erroneous payments. This was 
the second consecutive year that the auditor reported IPIA 
noncompliance for DHS. Although the auditors identified the agency's 
risk assessment methodology as inadequate, DHS reported in its PAR that 
it had assessed all of its programs for risk. A third agency auditor 
reported that the Department of Agriculture needed to strengthen its 
program risk assessment methodology to identify and test critical 
internal controls over program payments totaling over $100 million. 

Magnitude of Improper Payments Is Still Unknown: 

As I highlighted in my introduction, federal agencies' reported 
estimates of improper payments for fiscal year 2005 exceeded $38 
billion. This represents almost a $7 billion, or 16 percent, decrease 
in the amount of improper payments reported by 17 agencies in fiscal 
year 2004.[Footnote 12] On the surface, this appears to be good news. 
However, the magnitude of the governmentwide improper payment problem 
remains unknown. This is because, in addition to not assessing all 
programs, some agencies had not yet prepared estimates of significant 
improper payments for all programs determined to be at risk. 
Specifically, of the 32 agency PARs included in our review, 18 agencies 
reported improper payment estimates totaling in excess of $38 billion 
for some or all of their high-risk programs. The $38 billion represents 
estimates for 57 programs. Of the remaining 14 agencies that did not 
report estimates, 8 said they did not have any programs susceptible to 
significant improper payments, 5 were silent about whether they had 
programs susceptible to significant improper payments, and the 
remaining 1 identified programs susceptible to significant improper 
payments and said it plans to report an estimate by fiscal year 2007. 
Further details are included in appendix I. 

Regarding the reported $7 billion decrease in the governmentwide 
improper payment estimate for fiscal year 2005, we determined that this 
decrease was primarily due to a $9.6 billion reduction in the 
Department of Health and Human Services's (HHS) Medicare program 
improper payment estimate, which was partially offset by more programs 
reporting estimates of improper payments, resulting in a net decrease 
of $7 billion. Based on our review, HHS's $9.6 billion 
decrease[Footnote 13] in its Medicare program improper payment estimate 
was principally due to its efforts to educate health care providers 
about its Medicare error rate testing program and the importance of 
responding to its requests for medical records to perform detailed 
statistical reviews of Medicare payments. HHS reported that these more 
intensive efforts had dramatically reduced the number of "no 
documentation" errors in its medical reviews. The relevance of this 
significant decrease is that when providers do not submit documentation 
to justify payments, these payments are counted as erroneous for 
purposes of calculating an annual improper payment estimate for the 
Medicare program. HHS reported marked reductions in its error rate 
attributable to (1) nonresponses to requests for medical records and 
(2) insufficient documentation submitted by the provider. We noted that 
these improvements partially resulted from HHS extending the time that 
providers have for responding to documentation requests from 55 days to 
90 days. 

These changes primarily affected HHS's processes related to its efforts 
to perform detailed statistical reviews for the purposes of calculating 
an annual improper payment estimate for the Medicare program. While 
this may represent a refinement in the program's improper payment 
estimate, the reported reduction may not reflect improved 
accountability over program dollars. Our work did not include an 
overall assessment of HHS's estimating methodology. However, we noted 
that the changes made for the fiscal year 2005 estimate were not 
related to improvements in prepayment processes, and we did not find 
any evidence that HHS had significantly enhanced its preventive 
controls in the Medicare payment process to prevent future improper 
payments. Therefore, the federal government's progress in reducing 
improper payments may be exaggerated because the reported improper 
payments decrease in the Medicare program accounts for the bulk of the 
overall reduction in the governmentwide improper payments estimate. Mr. 
Chairman, I think the only valid observation at this time is that 
improper payments are a serious problem, agencies are working on this 
issue at different paces, and the extent of the problem and the level 
of effort necessary to control these losses is as yet unknown. 

What is clear is that there is a lot of work to do in this area. Agency 
auditors have reported major management challenges related to agencies' 
improper payment estimating methodologies and highlighted internal 
control weaknesses that continue to plague programs susceptible to 
significant improper payments. For example, the Department of Labor's 
agency auditor reported that inadequate controls existed in the 
processing of medical bill payments for its Federal Employee 
Compensation Act program. As a result, medical providers were both 
overpaid and underpaid. Internal control weaknesses were also 
identified in the Small Business Administration's (SBA) 7(a) Business 
Loan program. SBA did not consistently identify instances of 
noncompliance with its own requirements, resulting in improper 
payments. In another example, agency auditors for the Department of 
Education (Education) raised concerns about the methodology Education 
used to estimate improper payments for its Federal Student Aid program. 
The auditors reported that the methodology used did not provide a true 
reflection of the magnitude of improper payments in the student loan 
programs. To overcome these major management challenges, agencies will 
need to aggressively deploy more innovative and sophisticated 
approaches to correct such deficiencies and identify and reduce 
improper payments. 

Also, I would like to point out that the fiscal year 2005 
governmentwide improper payments estimate of $38 billion did not 
include seven major programs, with outlays totaling over $227 billion 
for fiscal year 2005. OMB had specifically required these seven 
programs to report selected improper payment information for several 
years before IPIA reporting requirements became effective.[Footnote 14] 
After passage of IPIA, OMB's implementing guidance required that these 
programs continue to report improper payment information under IPIA. As 
shown in table 1, the fiscal year 2005 governmentwide improper payment 
estimate does not include one of the largest federal programs 
determined to be susceptible to risk, HHS's Medicaid program, with 
outlays exceeding $181 billion annually. 

Table 1: Major Programs That Did Not Report Improper Payment Estimates 
as Previously Required by OMB and Target Dates for Estimates: 

Dollars in billions. 

Department of Agriculture--School Programs; 
Fiscal year 2005 outlays: $8.2; 
Target date for improper payment estimates: Fiscal year 2007. 

Department of Health and Human Services--State Children's Insurance 
Program; 
Fiscal year 2005 outlays: $5.1; 
Target date for improper payment estimates: Fiscal year 2007. 

Department of Agriculture--Women, Infants, and Children; 
Fiscal year 2005 outlays: $4.8; 
Target date for improper payment estimates: Fiscal year 2008. 

Department of Health and Human Services--Medicaid; 
Fiscal year 2005 outlays: $181.7; 
Target date for improper payment estimates: Fiscal year 2008. 

Department of Health and Human Services--Child Care and Development 
Fund; 
Fiscal year 2005 outlays: $4.9; 
Target date for improper payment estimates: Did not report target date. 

Department of Health and Human Services--Temporary Assistance for Needy 
Families; 
Fiscal year 2005 outlays: $17.4; 
Target date for improper payment estimates: Did not report target date. 

Department of Housing and Urban Development--Community Development 
Block Grant; 
Fiscal year 2005 outlays: $5.4; 
Target date for improper payment estimates: Did not report target date. 

Total; 
Fiscal year 2005 outlays: $227.5; 
Target date for improper payment estimates: Fiscal year 2007: 2; 
Target date for improper payment estimates: Fiscal year 2008: 2; 
Target date for improper payment estimates: Did not report target date: 
3. 

Sources: OMB and cited agencies' fiscal year 2005 PARs. 

[End of table] 

Of these seven programs, four programs reported that they would be able 
to estimate and report on improper payments sometime within the next 3 
fiscal years, but could not do so for fiscal year 2005. For the 
remaining three programs, the agencies did not estimate improper 
payment amounts in their fiscal year 2005 PARs and were silent about 
whether they would report estimates in the future. As a result, 
improper payments for these programs susceptible to risk will not be 
known for at least several years, even though these agencies had been 
required to report this information since 2002, with their fiscal year 
2003 budget submissions under previous OMB Circular No. A-11 
requirements. OMB reported that some of the agencies were unable to 
determine the rate or amount of improper payments because of 
measurement challenges or time and resource constraints, which OMB 
expects to be resolved in future reporting years. However, in the case 
of the HHS programs, the agency auditor recognized this lack of 
reporting as a reportable condition. In its fiscal year 2005 audit 
report on compliance with laws and regulations, the auditor reported 
that HHS potentially had not fully complied with IPIA because 
nationwide improper payment estimates and rates for significant health 
programs were under development and the agency did not expect to 
complete the estimation process until fiscal year 2007. 

Another factor which may affect the magnitude of improper payments is 
Hurricane Katrina, one of the largest natural disasters in our nation's 
history. In order to respond to the immediate needs of disaster victims 
and to rebuild the affected areas, government agencies streamlined 
eligibility verification requirements for delivery of benefits and 
expedited contracting methods in order to commit contractors to begin 
work immediately. These expedited processes can increase the potential 
for improper payments. For example, from our recent review of the 
Federal Emergency Management Agency's (FEMA) Individuals and Households 
Program[Footnote 15] we identified significant flaws in the process for 
registering disaster victims for assistance payments. We found limited 
procedures in place designed to prevent, detect, and deter certain 
types of duplicate and potentially fraudulent disaster registrations. 
As a result, we determined that thousands of registrants provided 
incorrect Social Security numbers, dates of birth, and addresses to 
obtain assistance and found that FEMA made duplicate assistance 
payments to about 5,000 of the nearly 11,000 debit card recipients. 

In one example of expedited contracting, the Department of 
Transportation (DOT) Office of Inspector General (OIG)[Footnote 16] 
determined that DOT had overpaid a contractor by approximately $32 
million for services to provide buses for evacuating hurricane victims 
from the New Orleans area. According to the OIG, the overpayment 
occurred because DOT had made partial payments based on initial task 
estimates and without documentation that substantiated the dollar 
amount of services actually provided to date. Although DOT promptly 
recovered the funds, the nature of these types of exigencies to 
adequately respond to the hurricane victims illustrates that future 
improper payments are likely to occur. As a result, selected agencies, 
such as DHS and DOT, have said they plan to perform concentrated 
reviews of payments related to relief efforts to identify the extent of 
improper payments, develop actions to reduce these types of payments, 
and enhance internal controls for future relief efforts. 

Additional Reporting Requirements for Recovery Auditing Information: 

Section 831 of the National Defense Authorization Act for Fiscal Year 
2002 provides an impetus for applicable agencies to systematically 
identify and recover contract overpayments. Recovery auditing is 
another method that agencies can use to recoup detected improper 
payments. Recovery auditing focuses on the identification of erroneous 
invoices, discounts offered but not received, improper late penalty 
payments, incorrect shipping costs, and multiple payments for single 
invoices. Recovery auditing can be conducted in-house or contracted out 
to recovery audit firms. The law authorizes federal agencies to retain 
recovered funds to cover in-house administrative costs as well as to 
pay contractors, such as collection agencies. Any residual recoveries, 
net of these program costs, shall be credited back to the original 
appropriation from which the improper payment was made, subject to 
restrictions as described in legislation. As we previously 
reported,[Footnote 17] with the passage of this law, the Congress has 
provided agencies a much needed incentive for identifying and reducing 
their improper payments that slip through agency prepayment controls. 
The techniques used in recovery auditing offer the opportunity for 
identifying weaknesses in agency internal controls, which can be 
modified or upgraded to be more effective in preventing improper 
payments before they occur. 

For fiscal year 2005, OMB clarified the type of recovery auditing 
information that applicable agencies are to report in their annual 
PARs. Prior to fiscal year 2005, applicable agencies were only required 
to report on the amount of recoveries expected, the actions taken to 
recover them, and the business process changes and internal controls 
instituted or strengthened to prevent further occurrences. In addition, 
OMB was not reporting on a governmentwide basis agencies' recovery 
audit activities in its annual report on agencies' efforts to improve 
the accuracy and integrity of federal payments. 

In fiscal year 2005, OMB revised its recovery auditing reporting 
requirements and required applicable agencies to provide more detailed 
information on their recovery auditing activities. Specifically, in 
addition to the prior year requirements, agencies that entered into 
contracts with a total value exceeding $500 million annually were 
required to discuss any contract types excluded from review and 
justification for doing so. In addition, agencies were required to 
report, in table format, various amounts related to contracts subject 
to review and actually reviewed, contract amounts identified for 
recovery and actually recovered, and prior year amounts. For fiscal 
year 2005, 19 agencies[Footnote 18] reported entering into contracts 
with a total value in excess of the $500 million reporting threshold. 
These 19 agencies reported reviewing more than $300 billion in contract 
payments to vendors. From these reviews, agencies reported identifying 
about $557 million in improper payments for recovery and reported 
actually recovering about $467 million, as shown in table 2. 

Table 2: Improper Payment Amounts Recovered in Fiscal Year 2005: 

1; 
Department or agency: Agency for International Development; 
Amount identified for recovery in fiscal year 2005: $5,900,000; 
Amount recovered in fiscal year 2005: $5,782,000. 

2; 
Department or agency: Department of Agriculture; 
Amount identified for recovery in fiscal year 2005: $333,000; 
Amount recovered in fiscal year 2005: $189,000. 

3; 
Department or agency: Department of Defense; 
Amount identified for recovery in fiscal year 2005: $473,000,000; 
Amount recovered in fiscal year 2005: $418,500,000. 

4; 
Department or agency: Department of Education; 
Amount identified for recovery in fiscal year 2005: $274,367; 
Amount recovered in fiscal year 2005: $112,506. 

5; 
Department or agency: Department of Energy; 
Amount identified for recovery in fiscal year 2005: $10,600,000; 
Amount recovered in fiscal year 2005: $9,500,000. 

6; 
Department or agency: Department of Health and Human Services; 
Amount identified for recovery in fiscal year 2005: $2,100,000; 
Amount recovered in fiscal year 2005: $14,430. 

7; 
Department or agency: Department of Homeland Security; 
Amount identified for recovery in fiscal year 2005: $2,191,000; 
Amount recovered in fiscal year 2005: $1,207,000. 

8; 
Department or agency: Department of Housing and Urban Development[A]; 
Amount identified for recovery in fiscal year 2005: $0; 
Amount recovered in fiscal year 2005: $0. 

9; 
Department or agency: Department of the Interior; 
Amount identified for recovery in fiscal year 2005: $1,548,620; 
Amount recovered in fiscal year 2005: $195,479. 

10; 
Department or agency: Department of Justice; 
Amount identified for recovery in fiscal year 2005: $1,044,320; 
Amount recovered in fiscal year 2005: $765,086. 

11; 
Department or agency: National Aeronautics and Space Administration; 
Amount identified for recovery in fiscal year 2005: $617,442; 
Amount recovered in fiscal year 2005: $617,442. 

12; 
Department or agency: Department of State; 
Amount identified for recovery in fiscal year 2005: $5,350,000; 
Amount recovered in fiscal year 2005: $5,190,000. 

13; 
Department or agency: Department of Transportation; 
Amount identified for recovery in fiscal year 2005: $2,663,984; 
Amount recovered in fiscal year 2005: $2,663,984. 

14; 
Department or agency: Department of the Treasury; 
Amount identified for recovery in fiscal year 2005: $428,977; 
Amount recovered in fiscal year 2005: $364,680. 

15; 
Department or agency: Department of Veterans Affairs; 
Amount identified for recovery in fiscal year 2005: $23,001,137; 
Amount recovered in fiscal year 2005: $12,957,264. 

16; 
Department or agency: Environmental Protection Agency; 
Amount identified for recovery in fiscal year 2005: $130,000; 
Amount recovered in fiscal year 2005: $130,000. 

17; 
Department or agency: General Services Administration; 
Amount identified for recovery in fiscal year 2005: $26,638,654; 
Amount recovered in fiscal year 2005: $8,317,187. 

18; 
Department or agency: Social Security Administration; 
Amount identified for recovery in fiscal year 2005: $317,000; 
Amount recovered in fiscal year 2005: $50,000. 

19; 
Department or agency: Tennessee Valley Authority; 
Amount identified for recovery in fiscal year 2005: $909,573; 
Amount recovered in fiscal year 2005: $443,763. 

Total; 
Amount identified for recovery in fiscal year 2005: $557,048,074; 
Amount recovered in fiscal year 2005: $466,999,821. 

Sources: OMB and cited agencies' fiscal year 2005 PARs. 

[A] For fiscal year 2005, the Department of Housing and Urban 
Development (HUD) reported that contracts subject to review totaled 
about $2.3 billion. Of this amount, HUD reported reviewing about $207 
million in contract payments, but identified no improper payments for 
recovery. 

[End of table] 

Concluding Observations: 

In closing, I want to say that we recognize that measuring improper 
payments and designing and implementing actions to reduce them are not 
simple tasks and will not be easily accomplished. The ultimate success 
of the governmentwide effort to reduce improper payments depends, in 
part, on each federal agency's continuing diligence and commitment to 
meeting the requirements of IPIA and the related OMB guidance. The 
level of importance each agency, the administration, and the Congress 
place on the efforts to implement the act will determine its overall 
effectiveness and the level to which agencies reduce improper payments 
and ensure that federal funds are used efficiently and for their 
intended purposes. With budgetary pressures rising across the federal 
government, and the Congress's and the American public's increasing 
demands for accountability over taxpayer funds, identifying, reducing, 
and recovering improper payments become even more critical. Fulfilling 
the requirements of IPIA will require sustained attention to 
implementation and oversight to monitor whether desired results are 
being achieved. 

Mr. Chairman, this concludes my statement. I would be pleased to 
respond to any questions that you or other members of the Subcommittee 
may have. 

Contacts and Acknowledgments: 

For more information regarding this testimony, please contact McCoy 
Williams, Director, Financial Management and Assurance, at (202) 512- 
9095 or by e-mail at [Hyperlink, williamsm1@gao.gov]. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this testimony. Individuals making key 
contributions to this testimony included Carla Lewis, Assistant 
Director; Francine DelVecchio; Christina Quattrociocchi; and Donell 
Ries. 

[End of section] 

Appendix I: Federal Agency Improper Payment Estimate Reporting in 
Fiscal Year 2005: 

1; 
Department or agency: Agency for International Development; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments. 

2; 
Department or agency: Department of Agriculture; 
Agency reported estimate for one or more programs. 

3; 
Department or agency: Department of Commerce; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

4; 
Department or agency: Department of Defense; 
Agency reported estimate for one or more programs. 

5; 
Department or agency: Department of Education; 
Agency reported estimate for one or more programs. 

6; 
Department or agency: Department of Energy; 
Agency reported estimate for one or more programs. 

7; 
Department or agency: Environmental Protection Agency; 
Agency reported estimate for one or more programs. 

8; 
Department or agency: Export-Import Bank of the United States; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments. 

9; 
Department or agency: Federal Communications Commission; 
Agency did not report estimate: Agency reported future date to report 
estimate. 

10; 
Department or agency: General Services Administration; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

11; 
Department or agency: Department of Health and Human Services; 
Agency reported estimate for one or more programs. 

12; 
Department or agency: Department of Homeland Security; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

13; 
Department or agency: Department of Housing and Urban Development; 
Agency reported estimate for one or more programs. 

14; 
Department or agency: Department of the Interior; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

15; 
Department or agency: Department of Justice; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

16; 
Department or agency: Department of Labor; 
Agency reported estimate for one or more programs. 

17; 
Department or agency: National Aeronautics and Space Administration; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

18; 
Department or agency: National Science Foundation; 
Agency reported estimate for one or more programs. 

19; 
Department or agency: Nuclear Regulatory Commission; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

20; 
Department or agency: Office of Personnel Management; 
Agency reported estimate for one or more programs. 

21; 
Department or agency: Pension Benefit Guaranty Corporation; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments. 

22; 
Department or agency: Postal Service; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments. 

23; 
Department or agency: Railroad Retirement Board; 
Agency reported estimate for one or more programs. 

24; 
Department or agency: Securities and Exchange Commission; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments. 

25; 
Department or agency: Small Business Administration; 
Agency reported estimate for one or more programs. 

26; 
Department or agency: Smithsonian Institution; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments. 

27; 
Department or agency: Social Security Administration; 
Agency reported estimate for one or more programs. 

28; 
Department or agency: Department of State; 
Agency reported estimate for one or more programs. 

29; 
Department or agency: Tennessee Valley Authority; 
Agency reported estimate for one or more programs. 

30; 
Department or agency: Department of Transportation; 
Agency reported estimate for one or more programs. 

31; 
Department or agency: Department of the Treasury; 
Agency reported estimate for one or more programs. 

32; 
Department or agency: Department of Veterans Affairs; 
Agency reported estimate for one or more programs. 

Total; 
Agency reported estimate for one or more programs: 18; 
Agency did not report estimate: Agency reported that no programs were 
susceptible to significant improper payments: 8; 
Agency did not report estimate: Agency silent as to whether it had 
programs susceptible to significant improper payments: 5; 
Agency did not report estimate: Agency reported future date to report 
estimate: 1. 

Source: GAO's analysis of cited agencies' fiscal year 2005 PARs. 

[End of table] 

[End of section] 

Appendix II: Improper Payment Estimates Reported in Agency Fiscal Years 
2004 and 2005 PARs or Annual Reports: 

Dollars in millions. 

Department or agency: 1; Agency for International Development; 
Program or activity: 1; All programs and activities; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $0.0[A]. 

Department or agency: 2; Department of Agriculture; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 2; Marketing Assistance Loan Program (previously 
Commodity Loan Programs); 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $45.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 3; Food Stamp Program; 
Improper payment estimates reported: 2004: $1,400.0[B]; 
Improper payment estimates reported: 2005: $1,432.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 4; School Programs[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 5; Women, Infants, and Children[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 6; Child and Adult Care Food Program; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $0.0[A]. 

Program or activity: 7; Wildland Fire Suppression Management; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $73.0. 

Program or activity: 8; Rental Assistance Program; 
Improper payment estimates reported: 2004: $20.0[B]; 
Improper payment estimates reported: 2005: $27.0. 

Program or activity: 9; Federal Crop Insurance Corporation; 
Improper payment estimates reported: 2004: $125.0; 
Improper payment estimates reported: 2005: $28.0. 

Program or activity: 10; Farm Security and Rural Investment; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $16.0. 

Program or activity: 11; Milk Income Loss Contract Program; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $0.2. 

Program or activity: 12; Loan Deficiency Payments; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $5.0 [Empty]. 

Department or agency: 3; Department of Commerce; 
Program or activity: 13; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 4; Department of Defense; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 14; Military Retirement Fund; 
Improper payment estimates reported: 2004: $66.0[B]; 
Improper payment estimates reported: 2005: $49.3; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Program or activity: 15; Military Health Benefits; 
Improper payment estimates reported: 2004: $99.6[B]; 
Improper payment estimates reported: 2005: $150.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Program or activity: 16; Military Pay; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $432.0. 

Department or agency: 5; Department of Education; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 17; Student Financial Assistance--Pell Grants[E]; 
Improper payment estimates reported: 2004: $571.0[B]; 
Improper payment estimates reported: 2005: $617.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 18; Student Financial Assistance--Federal Family 
Education Loan[E]; 
Improper payment estimates reported: 2004: $10.0[B]; 
Improper payment estimates reported: 2005: $16.0. 

Program or activity: 19; Title I; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $149.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Department or agency: 6; Department of Energy; 
Program or activity: 20; Payment programs; 
Improper payment estimates reported: 2004: $20.3; 
Improper payment estimates reported: 2005: $14.5; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Department or agency: 7; Environmental Protection Agency; 
Program or activity: 21; Clean Water State Revolving Funds; 
Improper payment estimates reported: 2004: $10.3; 
Improper payment estimates reported: 2005: $3.1; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 22; Drinking Water State Revolving Fund; 
Improper payment estimates reported: 2004: $0.0[F]; 
Improper payment estimates reported: 2005: $0.0[F]; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 8; Export-Import Bank of the United States[I]; 
Program or activity: 23; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 9; Farm Credit System Insurance Corporation[H]; 
Program or activity: 24; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 10; Federal Communications Commission; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 25; Universal Service Fund's Schools and 
Libraries; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $0.0[A]. 

Department or agency: 26; High Cost Support Program; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $0.0[A]. 

Department or agency: 11; Federal Deposit Insurance Corporation[H]; 
Program or activity: 27; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 12; General Services Administration; 
Program or activity: 28; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 13; Department of Health and Human Services; All 
programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 29; Medicaid[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 30; Medicare; 
Improper payment estimates reported: 2004: $21,700.0; 
Improper payment estimates reported: 2005: $12,100.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 31; Head Start; 
Improper payment estimates reported: 2004: $255.0; 
Improper payment estimates reported: 2005: $110.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Program or activity: 32; Temporary Assistance for Needy Families[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 33; Foster Care--Title IV-E; 
Improper payment estimates reported: 2004: $186.0[B]; 
Improper payment estimates reported: 2005: $182.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 34; State Children's Insurance Program[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 35; Child Care and Development Fund[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 14; Department of Homeland Security; 
Program or activity: 36; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 15; Department of Housing and Urban Development; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 37; Low Income Public Housing; 
Improper payment estimates reported: 2004: $356.0; 
Improper payment estimates reported: 2005: $326.0[G]; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 38; Section 8 Tenant Based; 
Improper payment estimates reported: 2004: $840.0; 
Improper payment estimates reported: 2005: $551.0[G]; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 39; Section 8 Project Based; 
Improper payment estimates reported: 2004: $511.0; 
Improper payment estimates reported: 2005: $324.0[G]; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 40; Community Development Block Grant (Entitlement 
Grants, States/Small Cities)[C]; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 41; Federal Housing Administration's Single Family 
Acquired Asset Management System; 
Improper payment estimates reported: 2004: $26.1; 
Improper payment estimates reported: 2005: $2.2. 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 42; Public Housing Capital Fund; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $133.5. 

Department or agency: 16; Department of the Interior; 
Program or activity: 43; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 17; Department of Justice; 
Program or activity: 44; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 18; Department of Labor; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 45; Unemployment Insurance; 
Improper payment estimates reported: 2004: $3,861.0; 
Improper payment estimates reported: 2005: $3,267.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 46; Federal Employees' Compensation Act; 
Improper payment estimates reported: 2004: $6.4; 
Improper payment estimates reported: 2005: $3.3; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 47; Workforce Investment Act; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $7.9; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 19; National Aeronautics and Space 
Administration; 
Program or activity: 48; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 20; National Credit Union Administration[H]; 
Program or activity: 49; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 21; National Science Foundation; 
Program or activity: 50; Research and Education Grants and Cooperative 
Agreements; 
Improper payment estimates reported: 2004: $4.4; 
Improper payment estimates reported: 2005: $1.1; 
Previous OMB Circular No. A-11 reporting requirements; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 22; Nuclear Regulatory Commission; 
Program or activity: 51; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Agency reported it had assessed all programs; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 23; Office of Personnel Management; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 52; Retirement Program (Civil Service Retirement 
System and Federal Employees Retirement System); 
Improper payment estimates reported: 2004: $197.7; 
Improper payment estimates reported: 2005: $152.2; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 53; Federal Employees Health Benefits Program; 
Improper payment estimates reported: 2004: $86.1; 
Improper payment estimates reported: 2005: $196.5; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 54; Federal Employees Group Life Insurance; 
Improper payment estimates reported: 2004: $2.1; 
Improper payment estimates reported: 2005: $2.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 24; Pension Benefit Guaranty Corporation[I]; 
Program or activity: 55; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 25; Postal Service[I]; 
Program or activity: 56; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 26; Railroad Retirement Board; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 57; Retirement and Survivors Benefits; 
Improper payment estimates reported: 2004: $147.9[B]; 
Improper payment estimates reported: 2005: $150.6; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Program or activity: 58; Railroad Unemployment Insurance Benefits; 
Improper payment estimates reported: 2004: $2.6[B]; 
Improper payment estimates reported: 2005: $2.3; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 27; Securities and Exchange Commission; 
Program or activity: 59; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 28; Small Business Administration; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 60; 7(a) Business Loan Program; 
Improper payment estimates reported: 2004: $0.0[A]; 
Improper payment estimates reported: 2005: $31.4; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 61; 504 Certified Development Companies; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 62; Disaster Assistance; 
Improper payment estimates reported: 2004: $1.1; 
Improper payment estimates reported: 2005: $1.6; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 63; Small Business Investment Companies; 
Improper payment estimates reported: 2004: $129.0; 
Improper payment estimates reported: 2005: $10.5; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Department or agency: 29; Smithsonian Institution[I]; 
Program or activity: 64; All programs and activities; 
Improper payment estimates reported: 2004: $0.0; 
Improper payment estimates reported: 2005: $0.0. 

Department or agency: 30; Social Security Administration; All programs 
and activities; 
Agency reported it had assessed all programs. 

Program or activity: 65; Old Age and Survivors' Insurance; 
Improper payment estimates reported: 2004: $1,707.0; 
Improper payment estimates reported: 2005: $3,681.0; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments[D]. 

Program or activity: 66; Disability Insurance; 
Improper payment estimates reported: 2004: $0.0[F]; 
Improper payment estimates reported: 2005: $0.0[F]; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 67; Supplemental Security Income Program; 
Improper payment estimates reported: 2004: $2,639.0; 
Improper payment estimates reported: 2005: $2,910.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Department or agency: 31; Department of State; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 68; International Narcotic and Law Enforcement 
Affairs-Narcotics Program; 
Improper payment estimates reported: 2004: $1.7; 
Improper payment estimates reported: 2005: $0.6. 

Program or activity: 69; International Information Program-U.S. Speaker 
and Specialist Program; 
Improper payment estimates reported: 2004: $1.4; 
Improper payment estimates reported: 2005: $1.9. 

Program or activity: 70; Vendor payments; 
Improper payment estimates reported: 2004: $0.8; 
Improper payment estimates reported: 2005: $0.4; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 71; Structures and Equipment; 
Improper payment estimates reported: 2004: $0.3[B]; 
Improper payment estimates reported: 2005: $0.2; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 32; Tennessee Valley Authority; 
Program or activity: 72; Payment programs; 
Improper payment estimates reported: 2004: $8.1; 
Improper payment estimates reported: 2005: $36.3. 

Department or agency: 33; Department of Transportation; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 73; Airport Improvement Program; 
Improper payment estimates reported: 2004: $0.0[J]; 
Improper payment estimates reported: 2005: $0.0[J]; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 74; Highway Planning and Construction; 
Improper payment estimates reported: 2004: $0.0[J]; 
Improper payment estimates reported: 2005: $0.0[J]; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 75; Federal Transit--Capital Investment Grants; 
Improper payment estimates reported: 2004: $0.0[J]; 
Improper payment estimates reported: 2005: $0.0[J]; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 76; Federal Transit--Formula Grants; 
Improper payment estimates reported: 2004: $0.0[J]; 
Improper payment estimates reported: 2005: $0.0[J]; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Department or agency: 34; Department of the Treasury; All programs and 
activities; 
Agency reported it had assessed all programs. 

Program or activity: 77; Earned Income Tax Credit; 
Improper payment estimates reported: 2004: $10,300.0[B]; 
Improper payment estimates reported: 2005: $10,500.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 35; Department of Veterans Affairs; 
All programs and activities; 
Agency reported it had assessed all programs. 

Program or activity: 78; Compensation; 
Improper payment estimates reported: 2004: $302.4[B]; 
Improper payment estimates reported: 2005: $322.9; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 79; Dependency and Indemnity Compensation; 
Improper payment estimates reported: 2004: $0.0[F]; 
Improper payment estimates reported: 2005: $0.0[F]; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 80; Education programs; 
Improper payment estimates reported: 2004: $70.0[B]; 
Improper payment estimates reported: 2005: $64.0. 

Program or activity: 81; Pension; 
Improper payment estimates reported: 2004: $280.7[B]; 
Improper payment estimates reported: 2005: $261.0; 
Previous OMB Circular No. A-11 reporting requirements. 

Program or activity: 82; Insurance programs; 
Improper payment estimates reported: 2004: $0.3[B]; 
Improper payment estimates reported: 2005: $0.3; 
Previous OMB Circular No. A-11 reporting requirements; 
Programs that the agency reported were not susceptible to significant 
improper payments. 

Program or activity: 83; Loan Guaranty; 
Improper payment estimates reported: 2004: $6.3; 
Improper payment estimates reported: 2005: $4.2. 

Program or activity: 84; Vocational Rehabilitation; 
Improper payment estimates reported: 2004: $9.5; 
Improper payment estimates reported: 2005: $9.8. 

Total; 
Improper payment estimates reported: 2004: $45,962.1; 
Improper payment estimates reported: 2005: $38,404.8; 
Previous OMB Circular No. A-11 reporting requirements: 46; 
Agency reported it had assessed all programs: 23; 
Programs that the agency reported were not susceptible to significant 
improper payments: 42. 

Source: GAO's analysis of cited agencies' fiscal year 2005 performance 
and accountability reports (PAR) or annual reports. 

[A] Agency did not report an annual improper payment estimate. 

[B] Fiscal year 2004 estimates were updated to the revised estimates 
reported in the fiscal year 2005 PARs. 

[C] See table 1 of this testimony. 

[D] The agency reported that this program was not high risk, meaning 
not susceptible to significant improper payments because it did not 
meet the Office of Management and Budget (OMB) reporting threshold of 
exceeding both $10 million and 2.5 percent of program payments. 

[E] Student Financial Assistance--Pell Grants and Federal Family 
Education Loan are combined together as Student Financial Assistance in 
OMB Circular No. A-11, Section 57. 

[F] Agency combined with the above program. 

[G] An additional $266 million of improper payments exist for these 
three programs. In its PAR, HUD did not provide a breakout of this 
amount among the three programs. 

[H] Agency fiscal year 2005 PAR or annual report information not 
available as of the end of our fieldwork. 

[I] Agency did not address improper payments or the Improper Payments 
Information Act (IPIA) requirements for this program in its fiscal year 
2005 PAR or annual report. 

[J] Agency reported that the annual improper payment amount was zero. 

[End of table] 

[End of section] 

Related GAO Products: 

Financial Management: Challenges in Meeting Governmentwide Improper 
Payment Requirements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-907T] 
Washington, D.C.: July 20, 2005. 

Financial Management: Challenges in Meeting Requirements of the 
Improper Payments Information Act. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-605T] 
Washington, D.C.: July 12, 2005. 

Financial Management: Challenges in Meeting Requirements of the 
Improper Payments Information Act. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-417] 
Washington, D.C.: March 31, 2005. 

Financial Management: Fiscal Year 2003 Performance and Accountability 
Reports Provide Limited Information on Governmentwide Improper 
Payments. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-631T] 
Washington, D.C.: April 15, 2004. 

Financial Management: Status of the Governmentwide Efforts to Address 
Improper Payment Problems. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-99] 
Washington, D.C.: October 17, 2003. 

Financial Management: Effective Implementation of the Improper Payments 
Information Act of 2002 Is Key to Reducing the Government's Improper 
Payments. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-991T] 
Washington, D.C.: July 14, 2003. 

Financial Management: Challenges Remain in Addressing the Government's 
Improper Payments. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-750T] 
Washington, D.C.: May 13, 2003. 

(195083): 

FOOTNOTES 

[1] Improper payments include inadvertent errors, such as duplicate 
payments and miscalculations; payments for unsupported or inadequately 
supported claims; payments for services not rendered; payments to 
ineligible beneficiaries; and payments resulting from fraud and abuse 
by program participants, federal employees, or both. 

[2] Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002). 

[3] OMB Memorandum M-03-13, "Improper Payments Information Act of 2002 
(Public Law 107-300)," May 21, 2003. 

[4] Fiscal year 2005 was the first time that these agency programs 
reported under the governmentwide reporting requirements of IPIA. 

[5] See Treasury Financial Manual, vol. 1, part 2, ch. 4700. A list of 
the 35 agencies is included in app. II. 

[6] Three agencies' annual reports were not available prior to the end 
of our fieldwork. 

[7] OMB Memorandum M-03-13. 

[8] Pub. L. No. 107-107, § 831, 115 Stat.1012, 1186 (Dec. 28, 2001) 
(codified at 31 U.S.C. §§ 3561-3567). 

[9] In November 2005, OMB issued draft revisions to its IPIA 
implementing guidance. This implementing guidance together with 
recovery auditing guidance is to be consolidated into Parts I and II of 
Appendix C to OMB Circular No. A-123, Management's Responsibility for 
Internal Controls (Dec. 21, 2004). 

[10] For GAO's audit report on the U.S. government's consolidated 
financial statements for fiscal year 2005, see Department of the 
Treasury, Financial Report of the United States Government (Washington, 
D.C.: December 2005), 135-154, which can be found on GAO's Internet 
site at www.gao.gov. 

[11] GAO, Financial Management: Challenges in Meeting Requirements of 
the Improper Payments Information Act, GAO-05-417 (Washington, D.C.: 
Mar. 31, 2005). 

[12] In their fiscal year 2005 PARs, selected agencies updated their 
fiscal year 2004 improper payment estimates to reflect changes since 
issuance of their fiscal year 2004 PARs. These updates increased the 
governmentwide improper payment estimate for fiscal year 2004 from $45 
billion to $46 billion. 

[13] HHS reported an improper payment estimate for its Medicare program 
of $12.1 billion for fiscal year 2005 and $21.7 billion for fiscal year 
2004. 

[14] Prior to the governmentwide IPIA reporting requirements beginning 
with fiscal year 2004, former Section 57 of OMB Circular No. A-11, 
required certain agencies to submit similar information, including 
estimated improper payment target rates, target rates for future 
reductions in these payments, the types and causes of these payments, 
and variances from targets and goals established. In addition, these 
agencies were to provide a description and assessment of the current 
methods for measuring the rate of improper payments and the quality of 
data resulting from these methods. 

[15] GAO, Expedited Assistance for Victims of Hurricanes Katrina and 
Rita: FEMA's Control Weaknesses Exposed the Government to Significant 
Fraud and Abuse, GAO-06-403T (Washington, D.C.: Feb. 13, 2006). 

[16] Department of Transportation Office of Inspector General, Internal 
Controls Over the Emergency Disaster Relief Transportation Services 
Contract, AV-2006-032 (Washington, D.C.: Jan. 20, 2006). 

[17] GAO, Financial Management: Challenges Remain in Addressing the 
Government's Improper Payments, GAO-03-750T (Washington, D.C.: May 13, 
2003). 

[18] We identified one additional agency--the Department of Commerce-- 
that should have reported recovery auditing amounts in its PAR. OMB was 
unable to provide further information on this omission prior to the 
hearing date. We also noted that the Department of Labor did not follow 
the required reporting format included in OMB's guidance. Labor 
reported that no improper payments were noted from its recovery 
auditing activities for fiscal year 2005 and that recovery audit 
efforts were not necessary.