The Senate on Wednesday approved legislation that requires agencies to identify and recover an estimated $98 billion in taxpayer funds lost annually because of improper payments.
The chamber passed the Improper Payments Elimination and Recovery Act by unanimous consent. The bipartisan bill mandates enhanced oversight of improper payments and will penalize agencies that consistently fail to fix accounting mistakes.
Co-sponsored by Sens. Tom Carper, D-Del.; Tom Coburn, R-Okla.; Susan Collins, R-Maine; John McCain, R-Ariz., and Claire McCaskill, D-Mo., the bill will amend the 2002 Improper Payments Information Act by lowering the threshold for which agencies must report improper payments.
"Agencies will have to be more aggressive in adopting proven strategies to root out waste, fraud and abuse," Carper said. "In addition to requiring agencies to identify and recover improper payments, we're giving agencies the tools to prevent wasteful spending from happening in the first place.
The bill mandates that agencies conduct recovery audits for any program that spends $1 million or more annually. In addition, agency heads would be required to review once every three years all programs that could be susceptible to significant improper payments and produce corrective action plans for preventing future waste. Programs with at least $100 million in improper payments will have to be reported to Congress.
As an incentive to rooting out erroneous payments, agencies will be allowed to retain 25 percent of recovered funds for a federal financial management program; 25 percent for the program's original purpose and 5 percent for the inspector general's office. The remainder will be returned to the general treasury to lower the debt.
If an agency fails to curtail its improper payments for two consecutive years, the Office of Management and Budget can authorize other agency funds be reprogrammed to improve the program's compliance. If a program is not in compliance for three consecutive years, then the agency must submit to a congressional reauthorization process.
The House in April passed a nearly identical version of the bill, sponsored by Patrick Murphy, D-Pa. The Senate bill now goes back to the House, where it is expected to be easily approved.
The bill stems from an April 2009 report by the Government Accountability Office that found an estimated $72 billion in federal improper payments in fiscal 2008 -- or roughly 4 percent of the $1.8 trillion of documented outlays for those related programs. The watchdog discovered that the figure should actually be higher, but some programs were not adequately tracked.
"Each year, the federal government washes billions of taxpayer dollars down the drain through improper payments, McCain said. "This waste is even more unconscionable in the present economy, as American families and businesses are struggling financially."
The White House also has made efforts recently to reduce federal improper payments.
In March, President Obama signed a memorandum directing federal agencies to use more incentive-based audit techniques to identify payments wasted through error or fraud. The administration's fiscal 2012 budget submissions also directs agencies to outline specific actions that will contribute to the governmentwide goal of reducing improper payments by $20 billion. And, last week, Obama established a Do Not Pay list, a single online destination where agencies can check the status of recipients of federal funds before sending payment.