GovernmentExecutive.com

Federal agencies soon will be required to create dashboards on their Web sites tracking the amount of money they have spent on improper payments, under a new directive from President Obama.

The executive order -- which Office of Management and Budget Director Peter R. Orszag previewed last week -- is aimed at increasing the transparency and public scrutiny of payments to beneficiaries of federal programs, contractors, grant recipients and other entities.

During the next six months, the Treasury secretary, attorney general and OMB director must publish online information about improper payments for high-priority or high-cost programs. The data is to include agencies' current and historical error rates for incorrect disbursements; the known causes of the mistakes; the amount of money that has been recovered; and the entities that have received the highest amount of outstanding improper payments as long as those entities aren't being considered for referral to the Justice Department for criminal prosecution.

The Web site must provide an e-mail link for the public to report suspected waste, fraud and abuse that could have led to improper payments.

"When the federal government makes payments ... it must make every effort to confirm that the right recipient is receiving the right payment for the right reason at the right time," the order states.

The new policy will put the pressure on contractors to come forward when they receive government money mistakenly. Previously, if a vendor discovered an overpayment, all it had to do was repay the government in full. The order, however, directs the Federal Acquisition Regulatory Council and the Justice Department's National Procurement Fraud Task Force to develop a set of penalties the agency can impose on contractors that fail to identify and return improper payments. Possible punishments could include debarment, suspension or financial penalties.

Contractors represent a relatively small portion of the $98 billion in improper payments in fiscal 2009. Last year, mistakes in Medicaid and Medicare payments accounted for $55 billion of the total. Other major sources of improper payments include Social Security, veterans' benefits and unemployment insurance, officials said.

"We can no longer tolerate these errors, mistakes and misdeeds," Orszag said. "Every dollar misspent is a dollar not going to help an unemployed worker, a family in need of help buying groceries or a senior who relies on Medicare to stay healthy."

Previously, agencies were required to set goals for addressing improper payments, but those targets did not have to involve reductions. The new order explicitly requires agencies to cut down on mistakes, and asks their inspectors general to sign off on their goals. Agencies are to share their plans with the public on a quarterly basis.

The order also requires agencies to appoint a Senate-confirmed official who will be responsible for setting and then meeting annual and semiannual targets for reducing improper payments associated with high-priority programs. If agencies miss their targets for two consecutive years, then the official must meet with OMB to develop a mitigation plan.

In addition, the directive creates a number of working groups made up of federal, state and local officials who will offer OMB recommendations on further addressing payment problems.

One group will study ways agencies can tailor their methods of identifying and measuring improper payments, including forensic accounting and audits. The group also will suggest opportunities for enhancing information sharing among agencies, including tools to improve eligibility verification and prepayment scrutiny.

Additional working groups will assess the effectiveness of single audits used by state and local governments and nonprofit organizations, and will look at potential incentives for recipients to help curb mistakes.