OMB publishes guide on reducing improper federal payments
The Office of Management and Budget on Thursday published a guide to help federal agencies curb the amount of taxpayer money wasted through erroneous payments to program beneficiaries.
OMB's guide offers instructions for implementing the 2002 Improper Payments Information Act (H.R. 4878), which was introduced by now-retired Rep. Steve Horn, R-Calif., and signed into law in late November. The act requires agencies to identify programs vulnerable to improper payments, estimate the extent of these erroneous payments and develop a plan to prevent such errors.
"With this new law, we can approach these efforts in a business-like fashion, assessing the scope of the problem and defining how to solve it," said OMB Deputy Director for Management Clay Johnson.
The General Accounting Office has estimated that improper payments can amount to more than $35 billion annually. They can result from payments to ineligible program beneficiaries, over- or underpayments to beneficiaries or duplicative payments. But accurate estimates are hard to come by, McCoy Williams, director of financial management and assurance at the General Accounting Office, told lawmakers during a May hearing.
OMB's guide addresses this issue by outlining the method agencies should use to estimate the extent of erroneous payments. It provides two examples of improper payment calculations. Agencies must report any programs with estimated improper payments exceeding $10 million to both Congress and OMB, according to the guide. The report must incorporate estimates of both under- and overpayments, and these estimates must be accurate at a 90 percent level of confidence with a 2.5 percent margin of error.
The guide, which OMB distributed to agency heads in late May and has now posted on its Web site, also includes detailed instructions for defining improper payments and for creating a plan to reduce them. This plan must include target mistake-reduction levels, and a timeline for reaching those targets.