Feds Continue to Lower Improper Payment Rates

Published: December 30, 2013

Government PerformanceOMBPolicy and LegislationWaste, Fraud, and Abuse

In a blog post on December 20th, OMB announced that improper payment rates had declined for a fourth year in a row, dropping from 5.42% in FY2009 to 3.53% in FY2013. According to OMB, improper payment rates dropped from 3.74% in FY2012 when factoring in DoD commercial payments.

Improper payments occur when funds go to the wrong recipient, payment is made in the wrong amount, documentation is not available to support a payment, or the recipient uses funds in an improper manner.  Cutting federal waste has been a priority for the Obama administration since day one.  Four years ago, President Obama signed an executive order directing agencies to cut improper payments by $50 billion by the end of FY2012.  The administration was $3 billion short of reaching its $50 billion goal, but had the government-wide error rate not decreased from FY2009 levels, the government would have made over $47 billion more in improper payments over the three year period.


To further thwart waste, fraud, and abuse, the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA) was signed into law in early 2013 which reinforces and accelerates the Administration’s “Do Not Pay” efforts, requiring all federal agencies to check the “Do Not Pay” list before issuing payments and awards.


Over the past year, agencies reduced improper payment rates in major programs across the government, including Medicaid, Medicare Advantage (Part C), Unemployment Insurance, the Supplemental Nutrition Assistance Program (SNAP - Food Stamps), Pell Grants, and two Social Security programs – Supplemental Security Income (SSI) and Retirement, Survivors, and Disability Insurance. 


Agencies are implementing innovative techniques to prevent improper payments.  For example, the SSI program is using new methods to verify bank account balances and ensure beneficiaries meet program asset thresholds before issuing benefits payments.  For benefits programs administered at state and local levels, federal agencies are working with states to implement more program integrity measures to reduce improper payments.  For example, specialized federal program integrity staff provide support to states to combat Medicaid provider waste, fraud, and abuse.  The administration is also advancing data analytics and improved technology to prevent improper payments before they happen. 


As an analyst, I must express some disappointment at the fact that hard data has not yet been released to support OMB’s blog. only contains improper payments data through FY2012.  And the FY2012 improper payment percentage shown on the site apparently does not contain DoD commercial payments, because the percentage is actually higher than what OMB reported in its blog, 4.35% versus 3.74%.  I don’t question the fact that improper payments have decreased from FY2012 to FY2013.  That assertion follows the trend of decline over the last few years.  However, having detailed data to analyze would help to further substantiate government efforts and reduction claims.

Even at a reported rate of 3.53% in improper payments, equating to over $100 billion per year, the government has continued room for improvement and contractor assistance.  The market remains ripe for contractor support such as prescreening, ID authentication, data warehousing, data authentication, analytics, predictive modeling, forensic accounting, and fraud case management to reduce improper payments.