Federal Government Continues to Lose Billions to Waste, Fraud and Abuse Annually

According to Congressman Darrell Issa (R-CA) during a House Oversight and Government Reform Committee hearing earlier this month regarding GAO’s updated high risk program list, the federal government lost $261 billion – or 7% of total spending – to fraud and waste in 2012.  Federal improper payments totaled $108 billion in FY2012, even though it declined 6% over the prior year. 

Improper payments are defined as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments).  It also includes any payment to an ineligible recipient or ineligible service, and duplicate payments, payments for services not received.   Medicare and Medicaid accounted for 45% of total improper payments in FY2012.  Total federal improper payments and improper payments as a percentage of federal program outlays are shown in the chart below:

 

Cutting federal waste has been a priority for the Obama administration since day one.  In November 2009, president Obama signed an Executive Order to reduce improper payments, boost transparency, increase accountability, and create new incentives for compliance against government waste.  The order directed agencies to cut improper payments by $50 billion by the end of FY2012.

Since that time, the percentage of improper payments to total program outlays has declined from 5.4% in FY2009 to 4.3% in FY2012, but the administration was $3 billion shy of reaching its $50 billion goal.  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 past three years. 

Additionally, federal waste still runs rampid.  One only has to look at Senator Coburn’s annual Wastebook to find numerous examples of federal waste, and many that are rather humorous.  For example, some Americans are receiving free or reduced-price cell phone service from the FCC Lifeline program, which is growing out of control.  Just in the last year, enrollment grew 43% to 16.5 million participants at a cost of $1.5 billion.  Coburn’s team estimates $4.5 billion is spent annually on junk food, fast food, luxury drinks, improper payments and even beer as part of the Supplemental Nutrition Assistance Program (SNAP).

However, there is hope.   Deltek believes technology solutions can help agencies root out waste, fraud and abuse and prevent erroneous payments.  In our new report, Technology Strategies for Federal Waste, Fraud and Abuse, we analyze the government’s progress in cutting waste and fraud, map out agencies’ ongoing needs, and explain how IT contractors can meet those needs.

Technology implementation success stories include:

• USDA implemented a Big Data solution that compares farmers' claims for crops ruined by floods and tornadoes with satellite information from the National Weather Service and mapping data to spot claims that might be fraudulent. In the past decade, the system has saved more than $1 billion.

• The OPM Office of the Inspector General audits the more than 400 health insurance companies participating in the Federal Employees Health Benefits Program (FEHBP).  Using SAS, OPM identifies bogus claims or administrative problems.  As a result, OPM officials estimate a 50% time savings, freeing auditors’ time to perform other analyses.

Deltek believes federal demand for IT solutions to combat waste, fraud and abuse will continue to increase over the next several years.  Such products and services include technologies for pre-screening and identity authentication; data capture and processing; examination and detection; and investigation, prosecution and recovery.