Agencies scrutinize more payments for mistakes

Administration officials announced Wednesday that the number of federal programs susceptible to making erroneous payments has gone up, as has the total estimate of federal outlays at risk of mistakes -- and that the increases represent good news for the government's ability to assess mistaken payments.

For fiscal 2006, the federal improper payment rate, which includes payments made mistakenly to ineligible recipients or as a result of fraud or other error, was 2.9 percent, translating to $40.5 billion in errors, according to a new Office of Management and Budget report.

That represents a drop from the fiscal 2005 rate of 3.1 percent.

But in its latest report, OMB focused on increases in the federal dollars that have come under scrutiny for improper payment risk in the third year of reporting under the 2002 Improper Payment Improvement Act. Those outlays rose to $1.7 trillion in fiscal 2006, from $1.4 trillion in fiscal 2004. Of that amount, $184 billion was newly identified in 2006 as risk susceptible.

In fiscal 2006, $1.4 trillion, or 81 percent, of the total at-risk amount came under systematic review, officials reported, an increase from the $1.1 trillion, or 79 percent, that was assessed in fiscal 2004. Agencies have had trouble meeting requirements for how they should assess the level of error that actually occurs.

Officials said nearly all of the risk-prone dollars will be evaluated by the end of fiscal 2008, and hailed recent increases as evidence that the government's capacity to address improper payments is increasing.

Officials said major progress was made in reducing mistaken payments in Medicare, which reduced errors from $12.1 billion in fiscal 2005 to $10.8 billion in fiscal 2006. They attributed much of the change to better processes for documenting claims.

OMB also highlighted progress at the Housing and Urban Development Department, which reduced payment problems in its rental assistance and public housing programs. The Agriculture Department also made strides by improving its error rate in the Food Stamp program. And at the Social Security Administration's Old Age, Survivors and Disability Insurance program, a 0.1 percent drop in the improper payment rate yielded a $401 million reduction.

The Government Accountability Office has questioned agencies' mistaken payment estimates. A November report noted that the Homeland Security Department, General Services Administration and NASA were among eight agencies reporting that they had no programs with significant risk of improper payments.

Senior GAO and OMB officials have debated where the risk threshold should be set, and how cost-benefit analyses should be used to focus on priorities. The officials agreed that lawmakers can help address the problem by allowing greater sharing of data on the beneficiaries of federal payments.