Agency overpayments rise above $20 billion

Twelve of the largest federal agencies reported making improper payments totaling $20.7 billion in fiscal 1999, according to a General Accounting Office report released Tuesday.

Senate Governmental Affairs Committee Chairman Fred Thompson, R-Tenn., held a press conference on Capitol Hill to present the report and announce legislation he plans to introduce that would address the problem of agencies' overpayments to contractors and federal program recipients.

"It's astounding that more than $20 billion of taxpayer money was squandered by just a handful of federal programs. And that's just a drop in the bucket," Thompson said. "The total figure for the thousands of government programs would be much, much higher. Federal agencies need to do a better job managing-first in terms of detecting improper payments, and then in stopping them."

The GAO report covers 20 major programs administered by 12 agencies:

• Agriculture
• Defense
• Energy
• Health and Human Services
• Housing and Urban Development
• Justice
• Labor
• Office of Personnel Management
• Social Security Administration
• State
• U.S. Customs Service
• Veterans Affairs

According to GAO, improper payments by these agencies rose from $19.1 billion in fiscal 1998 to $20.7 billion in fiscal 1999.

Thompson's legislation, S. 3030, would require the use of a process known as recovery auditing to help agencies identify discrepancies between the amount of money owed to contractors and beneficiaries and the actual amount paid. The House passed a similar bill, H.R. 1827, earlier this year.

"Our audits and those of agency inspectors general continue to demonstrate that improper payments are much more widespread than agency financial statement reports have disclosed thus far," said GAO in a letter to Thompson.

GAO said some agencies, including the Education Department, did not report improper payments, even though audit reports indicate they have made erroneous payments.

"Our position is that we have adequate financial controls in place to provide for the smooth operation of our financial systems here at the Education Department," said Education spokesman Jim Bradshaw.

Joshua Gotbaum, executive associate director of the Office of Management and Budget, defended the efforts of the Clinton administration and agencies to eliminate overpayments. Gotbaum noted that HHS had developed a program on its own to track payments and said the administration is using the department's proposals as a model for the rest of the executive branch.

"In the [GAO] report you received today, HHS' Medicare Fee-for-Service program made improper payments of almost $14 billion. This is a program that spent $170 billion in fiscal 1999-92 percent of that amount went to the right folks at the right time, with an error rate of 8 percent," said Gotbaum.

In response to Thompson's legislation, Gotbaum said the administration has supported the concept of recovery auditing for a number of years.

Gotbaum said OMB has been working with agencies since last winter to set up their own systems to measure and track payments, based on each agency's individual structure.

"This is not a 'one-size-fits-all' process," Gotbaum said.

The report on improper payments is GAO/AIMD-00-261R.