Obama directs government to withhold pay from delinquent contractors

President Obama signed a memorandum on Friday establishing a Do Not Pay list, a single online destination where agencies can check the status of recipients of federal funds before sending payment.

In announcing the memorandum, Vice President Joe Biden and Office of Management and Budget Director Peter R. Orszag said the federal government annually wastes billions of dollars on payments made to the wrong person or company, in the incorrect amount or for the wrong reason. And agencies frequently do not check all the available databases before making payments.

Failing to check these databases can result in an agency paying a deceased person, or a contractor who has been debarred, officials said. According to Biden, during the past three years, federal auditors have reported that the government paid out benefits totaling more than $180 million to approximately 20,000 deceased Americans and more than $230 million in benefits to approximately 14,000 fugitive felons or incarcerated individuals ineligible for benefits.

These types of improper payments not only "erode the bottom line of our balance sheet, but also the bottom line of public confidence," Biden said during a Friday press conference.

The memo directs Orszag to come up with a plan within 120 day to integrate all relevant federal databases so agencies can access them through a single entry point.

While the Do Not Pay list is being set up, the memo requires agencies to review current prepayment procedures and ensure they are reviewing available databases before releasing any federal funds. At a minimum, and when applicable, the memo will require agencies to cross-check the Social Security Administration's list of deceased individuals, the General Services Administration's list of suspended and debarred contractors, the Treasury Department's list of recipients who owe the government nontax debt, the Health and Human Service Department's list of parties excluded from participating in federal health care programs, and the Housing and Urban Development Department's system determining the credit-worthiness of individuals applying for federal loans.

The administration also announced the expanded use of a tool they say has helped limit fraud and abuse under the Recovery Act. The fraud mapping tool allows agencies to go beyond the current markers used to flag potential fraud, such as the lack of a valid mailing address. It allows agencies to examine connections among and between contractors and individuals for anything suspicious.

For example, Orszag said, with the tool, an agency could more easily see on a map that five separate companies all are headquartered at a single house -- with a pool and a boat in the backyard.

The tool, which only the Recovery Act Transparency Board now uses, will be expanded first to the Centers for Medicare and Medicaid Services, which combined had $65 billion in improper payments in 2009 -- with fraud a significant contributor to those improper payments, Biden and Orszag said.

Biden said in addition to catching those committing fraud, he hopes the tool will act as a deterrent.

"Not only do we have sheriffs, but we have weapons, weapons we didn't have before," he said. "The more who know about these tools, the less inclined they'll be to try [to commit fraud]."

The two announcements are another part of the administration's effort to reduce wasteful spending across government, Orszag said. But Biden pointed out they are also an attempt to apply the best practices and lessons learned under the Recovery Act to daily spending in the federal government.

The vice president called spending under the stimulus "uncharacteristically responsible," and said he and Recovery Act implementation leader Earl Devaney were, from day one of the effort, committed to ensuring the significant focus on reporting and responsibility on stimulus projects also applied to everyday spending.

"We hope the Recovery Act becomes a template for other spending," Biden said.