Federal Improper Payment Levels Continue To Climb

February 8, 2017 | By Jerry Ashworth | Post a Comment

1035776_money_issuesThe Government Accountability Office (GAO) recently released the results of its financial audit for fiscal years (FY) 2015 and 2016 federal consolidated financial statements, and the news was not good. It could be summed up in one sentence, to wit: “Our report … underscores that much work remains to improve federal financial management, and that the federal government continues to face an unsustainable long-term fiscal path.”

One area of particular concern to the federal grants community is the rising amount of improper payments. In recent years, the Obama administration worked with Congress to reduce the improper payment rate from 5.42 percent in FY 2009 to 3.53 percent in FY 2013. However, in FY 2015, the governmentwide improper payment rate was 4.39 percent, which corresponds to an improper payment dollar amount of $137 billion, and in FY 2016, the governmentwide improper payment rate was 4.67 percent, which equals an improper payment dollar amount of $144.4 billion.

GAO attributed the increase between FY 2015 and FY 2016 to percentage and dollar increases in the Medicaid Program, the Direct Loan Program, the Medicare Part C Program, the Pell Grant Program, the VA Community Care Program and the Earned Income Tax Credit (EITC) Program. The amount of improper payments could actually be higher because eight federal entities did not report FY 2016 estimated improper payment amounts for 18 risk-susceptible programs, including the Department of Agriculture’s Supplemental Nutrition Assistance Program and HHS’s Temporary Assistance for Needy Families.

“The federal government is unable to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them,” the audit stated. “Reducing improper payments is critical to safeguarding federal funds. Until the federal government has implemented effective processes to determine the full extent to which improper payments occur and has taken appropriate actions across entities and programs to effectively reduce improper payments, it will not have reasonable assurance that the use of federal funds is adequately safeguarded.”

About $44 billion of the FY 2016 improper payments were caused by insufficient documentation, GAO explained, while $34 billion in improper payments were caused by the inability to authenticate eligibility.

The audit discussed numerous tactics federal agencies were taking to reduce improper payments. For example, the Department of the Treasury has begun analyzing data across agencies to identify potential duplicative benefit payments in programs with related missions and beneficiaries. In addition, agency payment integrity tools include the Centers for Medicare and Medicaid Services’ (CMS) Center for Program Integrity, which has implemented CMS’ Fraud Prevention System; the Department of Defense Business Activity Monitoring tool; and the Department of Labor’s Unemployment Insurance Integrity Center of Excellence; and the Social Security Administration’s process to intercept payments to beneficiaries who have died or been incarcerated.

It’s somewhat deflating to realize that the progress the government made between FY 2009 and FY 2013 has essentially been washed away but this growing tide of improper payments. Hopefully, some of these steps being made to curb these payments will actually show some promise so that GAO in future years won’t have to include the quote we mentioned at the beginning of this post.

Let us know your reaction to the growing number of improper payments and what this means to federal funding.

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