OMB touts progress at reducing improper payments

Agencies eliminated almost $8 billion in mistaken payments through federal programs during fiscal 2005, carving 17 percent from the previous year's error levels and surpassing a $5 billion strategic goal, the Office of Management and Budget reported last week.

OMB said that programs participating in the first phase of a governmentwide effort to comply with the 2002 Improper Payments Information Act reported a $7.8 billion drop in improper payments in fiscal 2005 compared with the previous year. The improper payment total for programs tracked both years decreased from $45.1 billion to $37.3 billion. This is the first time a year-to-year comparison has been available under the current reporting system.

In accounting for the drop, OMB credited changes in documentation of Medicare payment claims, expanded data checks in the Labor Department's Unemployment Insurance program, enhanced income verification in the Housing and Urban Development Department's Public Housing/Rental Assistance program and improved quality controls at the Agriculture Department's Food Stamp program.

Those four programs are among seven that together made up 95 percent of improper payments reported in fiscal 2005. Treasury's Earned Income Tax Credit program, which OMB said contributed 28 percent of the total, was cited for continued high levels of errors, as were the Social Security Administration's Supplemental Security Income, and Old Age, Survivor and Disability Insurance programs.

"I applaud the administration for its work to eliminate improper payments," said Rep. Todd Platts, R-Pa., chairman of the House Government Reform Subcommittee on Government Management, Finance and Accountability. "We are starting to see results." Platts emphasized the role that technology is playing in improving agencies' internal controls, noting that Agriculture's Food Stamp program has "the lowest error rate in its history, largely because it has employed electronic benefit transfer." Data-matching has helped both HUD and the Labor Department cut down on errors, he said.

The administration's management score card includes a category for eliminating improper payments that encompasses the 15 agencies reporting in fiscal 2005. Four of those agencies -- HUD, the Labor and Veterans Affairs departments and the National Science Foundation -- have achieved "green" status, the highest mark possible on the traffic-light-style rating system.

Improper payments are defined as those in which the wrong recipient is paid, a recipient is over- or under-paid, or a recipient uses funds improperly. Improper payments constituted 3.9 percent of program outlays for those reporting in fiscal 2004, the base year under current guidelines. In fiscal 2005, that rate was reduced to 3.1 percent, according to OMB's analysis.

OMB has devised a three-phase strategy to eliminate improper payments, where each phase brings additional programs into the reporting structure.

The first phase is aimed at eliminating improper payments identified in 30 programs in the baseline year of fiscal 2004. The second phase, which started in fiscal 2005 and is running concurrently with the first, seeks to measure and reduce improper payments in 17 more programs.

Phase 2 resulted in the discovery of an additional $1.2 billion in improper payments that were not included in OMB's $37.3 billion figure used to calculate savings in 2005. That $1.2 billion will be used as a baseline to measure future progress for the programs added.

The programs reporting through phases 1 and 2 spend 85 percent of risk-susceptible dollars, according to OMB.

In the last phase, OMB intends to review all risk-susceptible payments by adding reporting systems for additional programs with significant outlays, including Medicaid, the National School Lunch/Breakfast program, and the Special Supplemental Nutrition Program for Women Infants and Children. Some of these programs are jointly administered with states, complicating efforts to track their finances.

For 2005, total outlays for these nonreporting, risk-susceptible programs came to almost $269 billion, according to OMB's report. Extending the 3.1 percent improper payment rate found elsewhere to these outlays would indicate more than $8 billion in additional improper spending.