Office of Management and Budget
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Reducing Improper Payments

Posted by Peter Orszag, Director on November 18, 2009 at 10:25 AM EDT
 
Each year, taxpayers lose billions of dollars in wasteful improper payments by the federal government to individuals, organizations, and contractors. "Improper payments" is an umbrella term that covers a number of financial transactions — overpayments to individuals or firms is one example; benefit payments to ineligible program participants is another. In 2008, improper payments totaled $72 billion; in 2009, they totaled $98 billion — an increase driven by improved detection and the significant increase in federal outlays associated with the economic downturn. These errors and mistakes are unacceptable. Taxpayers deserve to know that their dollars are being spent wisely and effectively.
 
In response, the President, over the next week, will sign an executive order to rein in these improper payments so that the right people receive the right payment for the right reason. The response revolves around three categories of action: boosting transparency, holding agencies accountable, and creating strong incentives for compliance. In addition to the Executive Order, Congress is making efforts to reduce fraud, waste, and abuse through improper payments.  We look forward to continuing to work with Congress, including Senators Carper and McCaskill and Congressman Patrick Murphy, on this important issue.
 
Here’s what the Executive Order will do:
 
Boost transparency. In line with the President’s commitment to openness, the Administration will take the following steps: 
  • Create an online dashboard of key indicators and statistics on improper payments.
     
  • Create and publicize a single mechanism for the public to report suspected incidences of waste, fraud, or abuse.
     
  • Require agencies to establish more frequent error reduction targets, and more frequent error measurement for certain high-priority programs.
     
  • Issue recommendations on ways to measure program access for intended beneficiaries, with a view to including those measures in the dashboard.
Hold agencies accountable for waste. To hold agencies accountable for misusing taxpayer dollars by allowing improper payments, the Administration will: 
  • Require each agency to designate a current, Senate-confirmed appointee to be accountable to the President for meeting improper payment reduction targets.
     
  • Require that all targets for improper payments show reduction and/or improvement and share the agency’s measurement methodology and plans for meeting the reduction targets with the agency’s Inspector General.
     
  • Issue recommendations on new internal techniques agencies could use to better detect and mitigate improper payments.
     
  • For programs where targets for reducing payment error rates are not met for two years in a row, require the agency head, Chief Financial Officer, and the agency Inspector General to provide the OMB Director a report describing the likely causes of the agency’s failure and actions it will take to meet reduction targets.
     
  • Increase data-sharing among agencies to improve eligibility verification and pre-payment scrutiny.
     
  • Require agency quarterly submissions and publication of reports on any high-dollar errors identified by the agency and actions the agency will take to recover the improper payment and to prevent future improper payments.
     
  • Demand that agencies’ plans for reducing program error not unduly burden program access and participation for legitimate beneficiaries, and hold agencies accountable for implementing those plans alongside reductions in improper payments.
Create incentives for compliance. To create incentives for states, agencies, and recipients to report and reduce payment errors, the Administration will: 
  • Pursue administrative actions to provide state, local, and other organizations with incentives for reducing improper payments.
     
  • Seek to enhance contractor accountability by pursuing methods such as subjecting contractors to debarment, suspension, and financial penalties for failing to timely disclosing credible evidence of significant overpayments received on government contracts. 
     
  • Revisit the Single Audit Act requirements.
The President is committed to reducing improper payments and making sure your taxpayer dollars are spent wisely.  At the same time, he also believes we must protect access to federal programs for their intended beneficiaries, especially the most vulnerable.  This order will contain protections designed to do just that. 
 
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