OMB wants to see plans for reducing improper payments

Federal agencies must develop a plan in their fiscal 2012 budget submissions to recover billions of taxpayer dollars wasted through error and fraud, according to a memorandum Office of Management and Budget Director Peter R. Orszag released on Tuesday.

The guidance directs agencies to outline specific actions for 2012 that will contribute to the governmentwide goal of reducing improper payments by $20 billion and recapturing $2 billion in taxpayer funds that have been mistakenly paid to vendors. "These actions should include discussions of cost-benefit trade-offs and connection to the agencies' overall strategy for improper payment reduction," Orszag wrote.

The 2012 budget submission, which is due to OMB on Sept. 13, also must include a target for the disposal of unneeded federal property and improving debt collection outcomes, according to Orszag.

In March, President Obama issued a memorandum asking agencies to sign more contracts for payment recapture audits, in which highly specialized accounting professionals and fraud examiners use cutting-edge computer programs to scan government payments for spurious claims. The audits would focus on duplicative payments, funds for services not rendered, overpayments and fictitious vendors, the memo stated.

Lawmakers are even more ambitious. In April, the House passed the Improper Payments Elimination and Recovery Act, which would require the government to recover the nearly $100 billion in funds lost annually due to payment mistakes. The bill mandates that agencies spend more than $1 million to perform recovery audits on all their programs. Agencies that fail to comply with current improper accounting and recovery laws would face penalties. Similar legislation has been introduced in the Senate but has yet to receive a vote.

The administration said improper payments to contractors, grantees and other recipients of federal funds totaled about $98 billion in 2009, with $54 billion stemming from Medicare and Medicaid.

During a national tele-town hall meeting in Maryland on Tuesday, Obama announced a new initiative to combat fraud in the Medicare program. "We're going to reduce by half the amount of waste, fraud and abuse in the Medicare system, protecting your Medicare and the American taxpayer's money," he told the crowd of roughly 120 seniors. "In fact, we're looking to eliminate waste everywhere we can."

The White House also announced a renewed effort to prosecute scam artists who prey on vulnerable seniors and to investigate cases of fraudulent Medicare billing.

The 2012 budget submissions also must detail steps agencies have taken to improve federal procurement techniques, reduce contract spending and increase the acquisition workforce, Orszag said.

The requests should detail savings that have been achieved by terminating or renegotiating contracts, engaging in strategic sourcing, fostering more competition, and moving away from riskier cost-reimbursement and time-and-materials contracts.

The efforts are designed to save $40 billion in contracting by 2011 -- a goal "we are well on the way of reaching," Orszag said during a speech on Tuesday at the Center for American Progress.