Agencies Need to Better Evaluate Efforts to Reduce Improper Payments, According to GAO

Key Takeaways:

• Agencies need to do more to effectively analyze improper payment root causes, and develop and implement corresponding action plans to reduce improper payments.
• Of the programs GAO analyzed, most agencies failed to monitor the effectiveness of their corrective actions to reduce improper payments.
• The ability to reduce improper payments will be imperative as it relates to the distribution of trillions of dollars in federal funds to combat the COVID-19 crisis.

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. Although improper payments do not directly translate to fraud or monetary loss, they need to be reduced to protect the integrity of taxpayer and federal funds. Total federal improper payments grew to nearly $175 billion in FY 2019, a 16% increase above FY 2018 levels.  

In an effort to reduce IP in federal programs, Congress has passed several pieces of legislation since 2002.  The Improper Payments Elimination and Recovery Act of 2010 (IPERA) expanded core principles of the 2002 Improper Payments Act in the areas of agency IP identification, compliance and reporting requirements. Agencies are required to analyze the root causes of improper payments and take corrective actions to reduce them.

In GAO’s recent analysis, it looked at agency actions to identify root causes of IP, the degree to which agency corrective actions corresponded to the root causes, and agency monitoring of the effectiveness of their corrective actions. GAO analyzed the corrective action plans for eight programs within six federal agencies that showed over $1 billion in IP in FY 2018.

GAO found five out of the six agencies used their most recent IP statistics to analyze the root causes of IP in the programs under review. However, Treasury looked at data from 2006 and 2008 to determine the root causes of IP for its Earned Income Tax Credit (EITC) program, which GAO deemed to be ineffective in developing corrective actions due to the age of the information analyzed.  

Additionally, GAO found that only one agency, VA, had specifically adhered to legislative and OMB IP guidance.  Also, Agriculture and Treasury did not develop corrective action plans based on IP root causes for the Supplemental Nutrition Assistance Program (SNAP) and the EITC program.  Education, HHS and SSA did not have processes in place to establish completion dates, monitor progress, or measure the effectiveness of their corrective actions.

The table below shows an overview of the results of GAO’s analysis of each program:

GAO made seven recommendations to improve agency processes for addressing root causes of IP and measure their effectiveness:

1. SNAP: Agriculture should develop and implement a process to analyze SNAP state-level root causes to identify potential similarities among the states and develop and implement SNAP agency-level corrective actions to help address them.
2. SNAP: Agriculture should revise its procedures to include processes for monitoring the progress and measuring the effectiveness of IP corrective actions.
3. Direct Loan and Pell Grant: Education should revise and document its process for measuring the effectiveness of its corrective actions based on its new statistical estimation methodology for Direct Loan and Pell Grant IP.
4. CHIP: HHS should document in policies and procedures its IP corrective action plan process. HHS should include processes for establishing planned completion dates, monitoring the progress of implementing corrective actions, and measuring the effectiveness of corrective actions.
5. EITC: Treasury should determine whether its current IP root cause analysis provides sufficiently relevant information that can be used as a basis for proposed corrective actions in reducing EITC IP and, if not, update the analysis using more timely data.
6. EITC: Treasury should update its strategy for addressing the root causes of EITC IP to include coordinating with other agencies to identify potential strategies and data sources that may help in determining EITC eligibility, and determining whether legislative changes are needed to help reduce EITC IP.
7. OASDI and SSI: SSA should develop and implement a process to measure the effectiveness of its corrective actions for OASDI and SSI improper payments.

GAO concluded that “unless agencies develop corrective action plans that correspond to root causes of improper payments and implement processes to monitor progress and measure their effectiveness, their ability to ensure that their efforts will reduce improper payments will be limited.”

Reducing IP is crucial to protecting federal funds. Additionally, with the federal commitment to spend over $2 trillion on the CARES Act and talks in the works for another coronavirus recovery package, oversight of federal spending in response to COVID-19 is critical.  Putting processes in place in order to limit IP on the front-end will be imperative.