Lawmaker wants more robust effort to collect improper payments

The Obama administration is setting the bar a bit too low when it comes to recovering improper payments, a House Democrat said on Friday.

Rep. Gerry Connolly, D-Va., said the administration's goal of recapturing at least $2 billion in improper payments between fiscal 2010 and fiscal 2012, is "rather modest." The government estimates it made $125 billion in improper payments in fiscal 2010, an increase of $16 billion from fiscal 2009. Connolly's remarks came during a House Oversight and Government Reform subcommittee hearing and were aimed at Office of Management and Budget Controller Daniel Werfel.

"Two billion doesn't cut it," said Connolly. "It's not sufficiently robust in my view, not when the universe is $125 billion."

Werfel noted the complexity of recapturing debt from recipients and the enormous amounts of data that agencies, most of which have their own internal financial "forensic units," must sort through and analyze before deciding to chase after an improper payment. And it's a balancing act for the government to prevent and recover improper payments while simultaneously ensuring that money is disbursed in a timely manner to those entitled to it, he said.

A panel of federal financial managers last month during a conference in Washington echoed Werfel's sentiments on the challenge the government faces in recapturing improper payments. At that time, George Mills, director of the provider compliance group in the office of financial management at the Centers for Medicare and Medicaid Services, described a typical day in his job. "You've got [OMB] and Capitol Hill saying, 'Stop these improper payments,' " he said. But rooting out improper payments takes time, and agencies can be accused of hassling folks in an effort to recover money, he added.

The amount of improper payments has continued to rise during the past decade, in part because the government has improved its detection methods. But the reported rate declined from 5.65 percent in fiscal 2009 to 5.49 percent in fiscal 2010. "This percentage decrease represents real progress, as the government would have made approximately $4 billion more in improper payments had the error rate remained the same in fiscal 2010 as it was in fiscal 2009," Werfel said.

OMB issued specific guidance for agencies on Thursday on complying with the 2010 Improper Payments Elimination and Recovery Act, which is the latest in a series of initiatives by the administration to put the government's fiscal house in order. In June 2010, Obama announced the creation of a Do Not Pay List, a network of databases that agencies can check for the status of a potential contractor or individual in an effort to prevent improper payments. That memo followed a March 2010 memorandum directing agencies to expand their use of payment recapture audits, which leverage technology and skilled accountants and fraud examiners to ferret out over- and underpayments to contractors, individuals and other recipients of federal funds. A November 2009 executive order instructed OMB to provide guidance to agencies to help them crack down on waste, fraud and abuse in financial management.

Improper payments are mostly the result of human error or lack of documentation, and less often of fraud. Werfel praised agencies such as the Defense Department and Centers for Medicare and Medicaid Services for their efforts in fraud detection and analysis. In particular, witnesses and lawmakers lauded the Recovery Accountability and Transparency Board, which has monitored the disbursement of stimulus money, for its success in tracking and uncovering improper payments. Werfel said the government would like to emulate its approach and techniques. "We were basically wowed by what they were able to do."

In fiscal 2010, Medicare and Medicaid accounted for the largest dollar amounts in improper payments -- $34.3 billion and $22.5 billion, respectively. CMS has created a fraud lab, and Werfel said it currently is investigating a potential fraud ring.