Agencies to receive guidelines this week on avoiding improper payments

By the end of the week, the Office of Management and Budget will provide federal agencies with guidelines on how to calculate the amount of taxpayer money wasted through erroneous payments to program beneficiaries, an OMB official told lawmakers Tuesday.

The guide will arrive roughly two weeks ahead of a May 31 deadline mandated by the 2002 Improper Payments Information Act (H.R. 4878), introduced by now-retired Rep. Steve Horn, R-Calif. and signed into law in late November. Under the law, agencies must review all programs vulnerable to improper payments, which can result from payments to ineligible program beneficiaries, over- or underpayments to beneficiaries, or duplicative payments.

Agencies must also estimate the extent of improper payments. The law requires agencies estimating more than $10 million in mistakes to send a report to Congress by March 31 of the following year, and develop a plan for reducing those mistakes.

Some agencies, including the Office of Personnel Management, Defense Department and Internal Revenue Service, have already reviewed benefit programs and made strides in identifying the causes of improper payments and fixing them, said Linda Springer, controller of the Office of Federal Financial Management at OMB, in testimony before the House Subcommittee on Government Efficiency and Financial Management.

For example, almost one in every three dollars the IRS distributes in Earned Income Tax Credit Dollars is paid erroneously, Springer said. The agency blamed income reporting errors and taxpayers who report the wrong filing status on their returns. IRS officials plan on reducing the problem by requiring additional information from taxpayers applying for the credit.

The General Accounting Office has estimated that improper payments from federal government benefit programs amount to more than $35 billion annually. But accurate estimates are hard to come by, said McCoy Williams, director of financial management and assurance at GAO.

Before the passage of Horn's legislation, improper payment information varied across agencies and programs, included a mixture of estimated improper payment rates and actual improper payments, and was reported inconsistently in various places such as annual financial statements, performance reports and the federal budget, according to GAO.

"None of these reporting mediums provided a comprehensive view of either the scope of the improper payment problem or of the individual agency or government efforts to reduce it," Williams testified.

The OMB guidance released this week will help agencies decipher the specific reporting requirements outlined in the 2002 Improper Payments Act and will indicate the steps necessary to meet those requirements. A draft version of the guidance provided to agencies for comment detailed methods for calculating actual improper payments and for devising estimates of the payments, according to GAO. The guide will lead to more uniform improper payment estimates, Springer said.

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