Agencies Struggle with Improper Payments Elimination and Recovery Act Compliance

Published: December 13, 2018

Policy and LegislationWaste, Fraud, and Abuse

Over half of the agencies required to comply with the Improper Payments Elimination and Recovery Act of 2010 (IPERA) have been reported as noncompliant by their inspectors general (IG) since 2014.

Improper payments (IP) are defined as payments made by the government to the wrong person, in the wrong amount, or for the wrong reason. Improper payments include both overpayments and underpayments, and were estimated to total $151B in FY 2018. Although improper payments do not directly translate to fraud or monetary loss, they need to be addressed and reduced to protect the integrity of taxpayer and federal funds.

In an effort to reduce IP in federal programs, Congress has passes several pieces of legislation since 2002.  The IPERA legislation expanded core principles of the 2002 Improper Payments Act in the areas of agency IP identification, compliance and reporting requirements. IPERA defined significant IP as exceeding $10M and 1.5% of program outlays or any program over $100M in incorrect payments. The law also provided a list of actions agencies must take to be compliant with IP reductions, including repercussions for failed error reduction efforts. If noncompliance is found for two or more consecutive years, OMB may use its discretion to reprogram or transfer funds to help the agency. 

Additionaly, IPERA requires IGs to annually assess and report on their agency’s compliance in the following areas of the law.  Did the agency?

  • Publish an agency financial report or performance accountability report
  • Conduct program-specific improper payment risk assessments
  • Publish improper payment estimates
  • Publish corrective action plans
  • Publish and meet annual improper payment reduction targets
  • Report a gross improper payment rate of less than 10 percent

GAO’s review of federal agency IG findings, concluded that 13 out of the 24 CFO Act agencies were noncompliant with one or more criteria under IPERA for FY 2016 and 14 were noncompliant with one or more criteria in FY 2017.  A year-by-year view of compliance by the number of agencies is shown below:

IPERA compliance by agency for FY 2017 is shown below:

GAO’s analysis of 2017 compliance found that 58 federal programs totaling $80B in IP were responsible for the 14 agencies’ noncompliance.  Eighteen of the 58 programs were reported noncompliant for three consecutive years or more.  $74.4B of the $80B in IP was due to Medicaid and Treasury’s Earned Income Tax Credit (EITC) programs.

GAO recommends that OMB update its guidance to specify other types of quality information that agencies with programs noncompliant for 3 or more consecutive years should include in their notifications to Congress.  Potential information could include matters related to risks, issues, root causes, measurable milestones, designated senior officials, and accountability mechanisms. Other useful information could include corrective actions, planned strategies or actions already taken by agencies to achieve compliance.

Look for more information on agency efforts to combat IP and waste, fraud and abuse in Deltek’s new report “Technology Strategies for Federal Waste, Fraud and Abuse” to be published later this month.