Agencies fail to account for improper payments

Most agencies reporting improper payments in fiscal 1999 failed to thoroughly address the problem in their financial and performance plans, according to a new report from the General Accounting Office. Improper payments are overpayments to contractors and beneficiaries made as the result of miscalculation or fraud. "Our audits and those of agency inspectors general continue to demonstrate that the extent of the problem is much more widespread than has been disclosed in agency financial statement reports," said the GAO report, "Billions in Improper Payments Continue to Require Attention"
(GAO-01-44). GAO said limited agency oversight and unclear governmentwide guidance on reporting and disclosing overpayments contribute to the waste. GAO also blamed agencies' outdated information systems for errors in government payments. Twelve of the 24 largest federal agencies reported making improper payments totaling $20.7 billion in fiscal 1999, according to a July 27 General Accounting Office report, "Financial Management: Improper Payments Reported in Fiscal Year 1999 Financial Statements" (GAO/AIMD-00-261R). In that report, GAO cited lack of oversight and internal monitoring controls coupled with a high volume of claims or payments as the main culprits in improper payments. Of the 12 agencies reporting improper payments, only the Health and Human Services Department, the Office of Personnel Management and the Social Security Administration comprehensively addressed overpayments in their fiscal 1999 financial management plans under the framework provided by the 1990 Chief Financial Officers Act and the 1993 Government Performance and Results Act, GAO found. The same agencies, in addition to the Veterans Affairs Department, also thoroughly discussed overpayments in their fiscal 2001 performance plans. Although most agencies are not properly addressing the issue of improper payments in their financial management and performance plans, GAO praised a few agencies' programs-including the Agriculture Department's Food Stamp program and HHS' Medicare Fee-for-Service program-for their proactive efforts to eliminate overpayments. In the July report, GAO asked the Office of Management and Budget to tell agencies how to estimate and report improper payments. OMB has followed through on the request by broadening the administration's management objectives to include error reduction and committing itself to providing uniform guidance to agencies on eliminating overpayments, GAO said. OMB agreed with GAO's findings, and said that although governmentwide guidance is important, agencies will ultimately need to develop strategies to minimize improper payments on a program-by-program basis. OMB also criticized GAO for focusing too heavily on agencies' failures to resolve overpayments. "We are disappointed that the criticism is not balanced by acknowledging the good work already under way by agencies to deal with this problem," said Sally Katzen, deputy director for management at OMB.