Auditing and Financial Management:

Status of Fiscal Year 2010 Federal Improper Payments Reporting

GAO-11-443R: Published: Mar 25, 2011. Publicly Released: Apr 15, 2011.

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Our work over the past several years has highlighted long-standing, widespread, and significant problems with improper payments in the federal government. Fiscal year 2010 marked the seventh year of implementation of the Improper Payments Information Act of 2002 (IPIA), which requires executive branch agencies to annually review all programs and activities to identify those that are susceptible to significant improper payments, estimate the annual amount of improper payment for such programs and activities, report these estimates, and report on actions taken to reduce any improper payment estimates that exceed $10 million. On July 22, 2010, the Improper Payments Elimination and Recovery Act of 2010 (IPERA) was enacted. IPERA amended IPIA by expanding on the previous requirements for identifying, estimating, and reporting on programs and activities susceptible to significant improper payments and to expand requirements for recovering overpayments across a broad range of federal programs. IPERA provisions related to identifying, estimating, and reporting on improper payments generally become effective in fiscal year 2011. For fiscal year 2010, federal agencies reported an estimated $125.4 billion in improper payments, an increase of about $16 billion over the fiscal year 2009 estimate of $109.2 billion. In light of the increase in improper payment estimates, Congress requested that we provide you with more detailed information on the reported amounts of estimated improper payments. Accordingly, this report summarizes available fiscal year 2010 improper payment information reported by federal executive branch agencies and the actions they reported taking to help reduce improper payments. We also summarized actions taken by the executive branch and Congress during fiscal year 2010 intended to improve transparency over, accountability for, and reduction of improper payments. Our scope included the 24 Chief Financial Officers Act agencies and 11 other entities that are significant to the 2010 Financial Report of the United States Government. In conducting our work, we obtained 317 federal agency fiscal year 2010 performance and accountability reports (PAR), agency financial reports (AFR), or annual reports to identify and aggregate the reported improper payment information. We did not independently validate the data reported in these agencies' PARs, AFRs, and annual reports. However, consistent with our reporting objective to summarize improper payment information, we are providing agency-reported data as descriptive information that will inform interested parties about the relative magnitude of governmentwide improper payments and other improper payment-related information..

Federal agencies reported improper payments of an estimated $125.4 billion in fiscal year 2010. This estimate represents about 5.5 percent of the $2.3 trillion of reported outlays for the related programs in fiscal year 2010. The $125.4 billion estimate is an increase of $16.2 billion from federal agencies' prior year estimate of $109.2 billion. Estimated improper payment amounts for both of these years may include estimates based on prior years' data, if current reporting year data was not available, as allowed by OMB guidance. Increases in the estimated amounts of improper payments reported for fiscal year 2010 were primarily attributable to increases in estimates related to four major programs: (1) Department of Labor's Unemployment Insurance program, (2) Department of the Treasury's Earned Income Tax Credit program, (3) Department of Health and Human Services' (HHS) Medicaid program, and (4) HHS's Medicare Advantage program. The increases in the estimates for these programs primarily related to an increase in reported program outlays in those programs. That was the case for the Medicaid and Medicare Advantage programs even though these 2 programs reported lower error rates. For Unemployment Insurance and Earned Income Tax Credit programs, both reported program outlays and error rates were higher for these programs when compared to fiscal year 2009 amounts. Of the 31 agencies for which we obtained their PAR, AFR, or annual report, the $125.4 billion estimate of improper payments federal agencies reported in fiscal year 2010 comes from over 70 programs spread among 20 federal agencies. A majority of the $125.4 billion of reported improper payments is accounted for by 10 programs. Specifically, the 10 programs account for about $118 billion or 94 percent of the total estimated improper payments reported for fiscal year 2010. Since the implementation of IPIA in 2004, federal agencies have consistently identified new programs or activities as risk-susceptible and reported estimated improper payment amounts. In fiscal year 2010, two programs were newly identified as being susceptible to significant improper payments. Specifically, the Department of Homeland Security identified the Customs and Border Protection-Border Security Fencing and Federal Emergency Management Agency--Grants-Transit Security Grants programs as risk-susceptible for the first time and reported on estimated improper payment amounts for those programs. While total reported improper payment estimated amounts increased for fiscal year 2010, there were a number of federal agencies that reported reducing improper payments and payment error rates in their programs and activities during fiscal year 2010. Forty federal agency programs, or about 53 percent of the total programs reporting improper payment estimates in fiscal year 2010, reported a reduction in the rate of estimated improper payments in fiscal year 2010 when compared to fiscal year 2009 rates. Thirty-three federal programs reported a reduction in the estimated amount of improper payments.

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