Sneak Preview: OMB Amends Improper Payment Guidance Under Circular A-123

December 12, 2014 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from an article in the Single Audit Information Service.) The Office of Management and Budget recently issued a memo that implements a new “improper payment compliance framework” for federal agencies. By amending Appendix C of OMB Circular A-123, Management’s Responsibility for Internal Control, OMB is calling for federal agencies to reduce the number of erroneous payments they make to the wrong entity or for the wrong amount.

OMB Circular A-123 “defines management’s responsibility for internal control in federal agencies,” and provides guidance to improve the accountability and effectiveness of federal programs and operations by establishing, assessing, correcting and reporting on internal control. Circular A-123 has four appendices, including Appendix C, Requirement for Effective Estimation and Remediation of Improper Payments. Circular A-123 was not among the eight circulars incorporated into OMB’s uniform grant guidance.

The federal improper payment rate has dropped over the last four years, from 5.42 percent in fiscal year 2009, to 3.53 percent in FY 2013, according to the most recent OMB statistics. In addition, the Improper Payments Elimination and Recovery Improvement Act (IPERIA) of 2012 enabled OMB to reassess existing guidance to ensure agencies are able to more efficiently reduce their improper payment rates. In the new memo (M-15-02), OMB said it is amending Appendix C to Circular. A-123 to “create a more unified, comprehensive and less-burdensome set” of improper payment requirements.

According to OMB, the amended Appendix C:

  • consolidates and streamlines federal agency reporting requirements, and eliminates duplicative requirements so agencies can spend less time submitting compliance reports and focus more on methods to ensure payment accuracy;
  • establishes new categories for reporting improper payments that will provide more details on improper payment estimates to encourage more effective corrective actions;
  • establishes a new internal control framework to ensure that payments are sent to the correct entity for the correct amount; and
  • provides guidance to federal agencies under IPERIA to strengthen the statistical validity of improper payment estimates by including, among other things, erroneous payments to federal employees.

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