In the fourth year of implementation of the Improper Payments Information Act of 2002 (IPIA), major executive branch agencies reported a total improper payment estimate of about $55 billion for fiscal year 2007. This increase from the prior year estimate of $41 billion was primarily attributable to a component of the Medicaid program reporting improper payments for the first time totaling about $13 billion for fiscal year 2007. We view this increased reporting as a positive step to improve transparency over the full magnitude of improper payments across the federal government. As Congress requested, the objective of this report is to provide summary data and preliminary analysis of the improper payment estimates reported by federal executive branch agencies (federal agencies) in their fiscal year 2007 performance and accountability reports (PAR) or annual reports.

The fiscal year 2007 estimate of about $55 billion represents improper payments for 78 programs in 21 agencies, an increase from the 20 agencies and 60 programs that made up the fiscal year 2006 estimate. The $55 billion estimate also represents about 2 percent of total fiscal year 2007 federal executive branch agencies' government outlays of almost $2.8 trillion and largely consists of improper payments made in eight programs. Collectively, the eight programs account for about $48 billion or approximately 88 percent of the total estimate. The largest estimate was related to the Department of Health and Human Services' (HHS) Medicaid program with estimated improper payments of about $13 billion. Our review found that some agencies still have not developed improper payment estimates for all of their programs and activities identified as susceptible to significant improper payments. A majority of these programs represent newly identified risk-susceptible programs reported by the Department of Homeland Security. The completion of risk-susceptibility assessments on programs is a positive step toward addressing IPIA requirements. We also found, however, that three HHS programs had not reported improper payment estimates for fiscal year 2007, although the Office of Management and Budget (OMB) required these and other programs to report selected improper payment information for several years before passage of IPIA. After the enactment of IPIA, OMB's implementing guidance required that these programs continue to report improper payment information under IPIA. HHS reported in its fiscal year 2007 PAR that pilot reviews were conducted in various states for the Temporary Assistance for Needy Families and Child Care and Development Fund programs and that estimated improper payment rates for these programs would be reported in fiscal year 2008. Further, HHS reported that it also expects to report a comprehensive improper payment estimate rate for the State Children's Health Insurance Program (SCHIP) that will encompass its fee-for-service, managed care, and eligibility components. We recognize that measuring improper payments for these state-administered programs and designing and implementing actions to reduce or eliminate them are not simple tasks, particularly for grant programs that rely on administration efforts at the state level. Consequently, as we previously reported in April 2006, communication, coordination, and cooperation among federal agencies and the states will be critical factors in estimating national improper payment rates and meeting IPIA reporting requirements for state-administered programs.

• View Report (PDF)