OMB defends actions on improper payments
The Office of Management and Budget rejects criticism that it was lax in implementing the 2002 Improper Payments Act.
Recent criticism that the Office of Management and Budget has been too lax in implementing a law designed to curb erroneous payments to federal program beneficiaries is unfounded, an administration official said Tuesday.
Senate Finance Committee leaders last week said that OMB's May 2003 guidance on the 2002 Improper Payments Act may allow federal agencies to underreport spending mistakes. The House Government Reform Subcommittee on Financial Management expressed similar worries in August following a series of hearings examining the law.
But according to Linda Springer, controller of OMB's Office of Federal Financial Management, the administration's guidelines are stringent enough. The May 2003 rules ask federal agencies to monitor "more programs than ever before" for payment errors, she said.
The administration's efforts to help agencies catch and resolve spending errors predate the Improper Payments Information Act (H.R. 4878), introduced by former Rep. Steve Horn, R-Calif., and signed into law in late November 2002. OMB Circular A-11, Section 57 asks agencies to estimate erroneous payments generated by a variety of federal programs, including Medicare and Social Security.
"We're certainly not trying to take any steam out of the effort," Springer said.
The improper payments law builds on requirements in Circular A-11, asking agencies to identify all programs "susceptible to significant" errors. Mistakes typically occur when agencies distribute benefits to ineligible applicants, over- or underpay beneficiaries, or send out duplicative payments.
Lawmakers left it to OMB to define what constitutes a "significant" payment error. The administration's subsequent guidelines ask agencies to single out programs with estimated improper payments of more than $10 million. Under present guidelines, the mistakes must also account for more than 2.5 percent of a program's spending.
OMB's rules require agencies to complete a more thorough analysis of programs deemed susceptible to improper spending based on the $10 million and 2.5 percent thresholds. Through this analysis, agencies must come up with a refined estimate of the magnitude of mistakes. If mistakes still top $10 million according to the refined estimate, then agencies must develop a plan for reducing errors and must list the program in an annual report to Congress.
But in a Jan. 9, 2004 letter to OMB Director Joshua Bolten, Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., said OMB should not have established the 2.5 percent threshold and should have simply required agencies to report all programs generating estimated improper payments of more than $10 million. Because of the 2.5 percent threshold, some programs wasting more than $10 million could slip through the cracks, the senators explained.
"The improper payment figures that will eventually be reported to the public will look better and feel better than they really are, and the public and the Congress will have a less accurate understanding of the integrity of our federal programs," Grassley and Baucus said.
But Springer said 2.5 percent is a "relatively low threshold." Circular A-11, Section 57, captures programs such as Medicare, where erroneous payments are likely to be substantial, but could fall under the 2.5 percent threshold in OMB's improper payments law guidance, she noted.
Reps. Todd Platts, R-Pa., and Marsha Blackburn, R-Tenn., of the House Government Reform Subcommittee on Financial Management, also questioned the 2.5 percent threshold in an August letter to Bolten. The committee received a response from Springer, but is reserving a final judgment on the OMB guidelines until members get a better grasp on the nature and magnitude of the improper payments problem, a staffer said.
Accurate statistics on the amount of money the government wastes each year through payment errors are hard to come by, the staff member explained. The General Accounting Office has estimated that improper payments can amount to more than $35 billion annually. But other estimates, the staffer said, place that number as high as $80 billion.
The committee expects to receive new estimates in the coming months, and will continue to assess whether OMB is properly implementing the 2002 improper payments law, he added.