New Data Discloses a Slight Rise in Improper Payments in FY 2018

Each year, the Treasury Department, in conjunction with DOJ and OMB, publishes datasets on paymentaccuracy.gov regarding improper payments made across federal programs to persons, organizations or contractors. As defined by the Improper Payments Elimination and Recovery Act of 2010, improper payments are “payments made by the government to the wrong person, in the wrong amount, or for the wrong reason,” representing a loss to the federal government. Improper payments include both overpayments as well as underpayments. Contrary to popular belief, improper payments do not directly translate to an intentional misuse of funds. In fact, many causes for improper payments include inadvertent errors such as processing of data or structural issues with programs.

Released earlier than usual, the FY 2018 data identifies a rise in improper payments, from $141B in FY 2017 to $151B in FY 2018, at a slightly increased improper payment rate of 4.6% in FY 2018.

Source: paymentaccuracy.gov

The dip in the improper payment rates seen in FY 2013 is largely due to an increase in several program  outlays absent in FY 2012 including, Commercial Pay programs at DOD, the Direct Loan and Federal Family Education Loan programs at DOE and GSA’s Rental of Space program. However, both improper payment amounts and rates steadily climb back up after FY 2013 primarily due to rising improper payments in conjunction with larger health program outlays in Medicare and Medicaid.

The relationship of health programs to improper payments is also seen in the distribution of improper payments by agency:

Source: paymentaccuracy.gov

In FY 2018, HHS programs made up 72% of the improper payment total.  Medicaid makes up the largest portion of improper payments under HHS at 42% with $36B in improper payments in FY 2018.  The Medicare Fee-for-Service (FFS) program follows close behind, making up 37% of the improper payments at $32B in FY 2018.

Core causes for improper payments in FY 2018 include:

Source: paymentaccuracy.gov

As can be seen, administrative and process errors made by federal, state and local or other participating parties make up the largest root cause in improper payments. These type of errors include mishaps in data entry, classification and/or processing. Moreover, the causes found under program design/structural issues in FY 2018 mainly occur at Labor, Treasury, USDA and VA.

Pending legislation as well as policies such as the President’s Management Agenda and the recently released Antifraud Playbook have shed light on the waste, fraud and abuse of federal dollars with federal agencies continuing to seek ways to curb the ongoing problem.

Stay tuned. Deltek’s Federal Market Analysis team will be releasing an expanded report digging deeper into the trends, drivers and technologies assisting agencies in combating waste, fraud and abuse in federal programs.