[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
    THE IMPROPER PAYMENTS INFORMATION ACT--ARE AGENCIES MEETING THE 
                        REQUIREMENTS OF THE LAW? 

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      FINANCE, AND ACCOUNTABILITY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 5, 2006

                               __________

                           Serial No. 109-252

                               __________

       Printed for the use of the Committee on Government Reform


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                               index.html
                      http://www.house.gov/reform
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

   Subcommittee on Government Management, Finance, and Accountability

              TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina        EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia                  MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota             PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee

                               Ex Officio
                      HENRY A. WAXMAN, California

                     Mike Hettinger, Staff Director
               Tabetha Mueller, Professional Staff Member
                          Erin Phillips, Clerk
            Adam Bordes, Minority Professional Staff Member





































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 5, 2006....................................     1
Statement of:
    Combs, Linda M., Controller, Office of Federal Financial 
      Management, Office of Management and Budget; Charles 
      Johnson, Assistant Secretary for Budget, Technology, and 
      Finance, U.S. Department of Health and Human Services, 
      accompanied by Timothy B. Hill, Chief Financial Officer and 
      Director, Office of Financial Management, Centers for 
      Medicare and Medicaid Services; and McCoy Williams, 
      Director, Financial Management and Assurance, U.S. 
      Government Accountability Office...........................     7
        Combs, Linda M...........................................     7
        Johnson, Charles.........................................    14
        Williams, McCoy..........................................    34
Letters, statements, etc., submitted for the record by:
    Combs, Linda M., Controller, Office of Federal Financial 
      Management, Office of Management and Budget, prepared 
      statement of...............................................     9
    Johnson, Charles, Assistant Secretary for Budget, Technology, 
      and Finance, U.S. Department of Health and Human Services, 
      prepared statement of......................................    16
    Platts, Hon. Todd Russell, a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........     3
    Towns, Hon. Edolphus, a Representative in Congress from the 
      State of New York, prepared statement of...................     5
    Williams, McCoy, Director, Financial Management and 
      Assurance, U.S. Government Accountability Office, prepared 
      statement of...............................................    36


    THE IMPROPER PAYMENTS INFORMATION ACT--ARE AGENCIES MEETING THE 
                        REQUIREMENTS OF THE LAW?

                              ----------                              


                        WEDNESDAY, APRIL 5, 2006

                  House of Representatives,
Subcommittee on Government Management, Finance, and 
                                    Accountability,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:04 p.m., in 
room 2247, Rayburn House Office Building, Hon. Todd Russell 
Platts (chairman of the subcommittee) presiding.
    Present: Representatives Platts, Duncan, and Maloney.
    Staff present: Mike Hettinger, staff director; Dan Daly, 
counsel; Tabetha Mueller, professional staff member; Erin 
Phillips, clerk; Adam Bordes, minority professional staff 
member; and Jean Gosa, minority assistant clerk.
    Mr. Platts. A quorum being present, this hearing of the 
Government Reform Subcommittee on Government Management, 
Finance, and Accountability will come to order.
    Congress has a responsibility to ensure that tax dollars 
are spent in the most effective manner possible and for their 
intended purpose. Unfortunately, as we will hear today, 
billions of dollars continue to be lost due to improper 
payments--any payment that should not have been made.
    This administration and Congress have made the reduction of 
improper payments a top priority. In support of this goal, this 
subcommittee believes that taxpayers have a fundamental right 
to know how their tax dollars are being spent. In 2002, my 
esteemed former colleague, Congressman Steve Horn, who served 
as chairman of this subcommittee, was successful in securing 
the enactment of the Improper Payments Information Act of 2002. 
This law has helped bring to the forefront the need to address 
this issue more aggressively.
    The work of the past few years has brought us a long way to 
getting our arms around the extent of this problem. What we 
know today is that a primary cause of these mistakes, which 
occur throughout Government, is the lack of adequate internal 
financial controls and business process systems. Some agencies 
have employed new technologies, such as data mining and 
electronic benefits transfer, with great success in helping to 
reduce their error rates. More can and must be done. This 
subcommittee will continue to conduct aggressive oversight on 
this important topic.
    Today we will have from the Honorable Dr. Linda Combs, 
Controller in the Office of Federal Financial Management at the 
Office of Management and Budget. Dr. Combs, we again thank you 
for being with us. As in the past, we certainly appreciate your 
knowledge and wisdom that you bring to the committee.
    Ms. Combs. Thank you, Mr. Chairman.
    Mr. Platts. We will also be joined by Mr. Charles Johnson 
of the Department of Health and Human Services, who is 
accompanied by Mr. Tim Hill, Chief Financial Officer at the 
Center for Medicare and Medicaid Services. We appreciate both 
of you being with us as well and look forward to your 
testimony. And we are joined finally by McCoy Williams, a 
regular here at the subcommittee. Mr. Williams, we appreciate 
you being with us and, again, the expertise and knowledge you 
bring to the subcommittee.
    Mr. Williams. Thank you, Mr. Chairman.
    [The prepared statement of Hon. Todd Russell Platts 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Platts. We will proceed with opening statements and 
then get into your statements, and we appreciate the written 
testimonies you have provided, and if you want to summarize 
that here today, then we will get into questions and answers.
    The gentleman from Tennessee, did you have a statement you 
would like to begin with?
    Mr. Duncan. Yes, Mr. Chairman. Thank you very much. Very 
briefly, I will just say that, you know, the work of this 
Subcommittee on Government Management, Finance, and 
Accountability, I guess it is not the most dramatic or colorful 
or high-profile, but it is certainly extremely important, 
particularly, as we all know, when we have a national debt of 
well over $8 trillion and now we have raised the debt limit to 
$9 trillion because we know we are headed very quickly to that 
level.
    So I think this work is very, very important, and I 
appreciate the seriousness and diligence with which you do your 
duties, Mr. Chairman, and I specifically remember the hearing 
that you had on this same legislation a year or so ago. And, in 
fact, we all represent about 700,000 people, but I send out a 
newsletter a couple of times a year to the 285,000-odd 
addresses in my district. And I wrote about this hearing as one 
of the topics, one of the many topics that I covered in that 
newsletter.
    We heard some pretty amazing, pretty startling information 
in the hearing last year, and I am pleased that you have called 
another hearing, and I look forward to hearing the testimony to 
see what progress has been made since that point.
    Thank you very much.
    Mr. Platts. Thank you, Mr. Duncan, and we always appreciate 
and welcome your participation and your great leadership on 
financial accountability as well.
    Mr. Duncan. Thank you.
    [The prepared statement of Hon. Edolphus Towns follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Platts. We will proceed to our witnesses. The practice 
of the committee, if we could swear each of you in before your 
testimonies and any others that will be advising you as part of 
your testimonies here today. If you would like to rise and 
raise your right hands?
    [Witnesses sworn.]
    Mr. Platts. Thank you. You may be seated. The clerk will 
note that all the witnesses have affirmed the oath, and, Dr. 
Combs, we will begin with you, if you would like to proceed.

  STATEMENTS OF LINDA M. COMBS, CONTROLLER, OFFICE OF FEDERAL 
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; CHARLES 
   JOHNSON, ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY, AND 
    FINANCE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
  ACCOMPANIED BY TIMOTHY B. HILL, CHIEF FINANCIAL OFFICER AND 
DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, CENTERS FOR MEDICARE 
AND MEDICAID SERVICES; AND McCOY WILLIAMS, DIRECTOR, FINANCIAL 
MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                  STATEMENT OF LINDA M. COMBS

    Ms. Combs. Thank you, Chairman Platts, Congressman Towns, 
and members of this committee. I am certainly pleased to be 
here today to discuss the administration's efforts to improve 
the accuracy and integrity of Federal payments. As a reflection 
of how important the effective and efficient stewardship of 
taxpayer dollars is, the President has made the elimination of 
improper payments one of his highest management priorities. I 
appreciate the opportunity we have today to share some recent 
success stories on agency efforts, to discuss steps we are 
taking to address ongoing challenges, and to provide you with 
the highlights from OMB's second annual report on 
governmentwide improper payments.
    During fiscal year 2005, the Federal Government made 
substantial progress in meeting the President's goal to 
eliminate improper payments. Most significantly, the 
governmentwide improper payment total reported for fiscal year 
2004 decreased from $45.1 billion to $37.3 billion, a reduction 
of approximately $7.8 billion, or 17 percent.
    Notable accomplishments from this past year include: 
Medicare's reported improper payments decreased by more than $9 
billion, or 44 percent.
    The U.S. Department of Agriculture reported an error rate 
of less than 6 percent in the food stamp program, which is the 
lowest error rate in the program's history.
    The Department of Labor reduced improper Unemployment 
Insurance payments by approximately $600 million in fiscal year 
2005. This represents a greater than 15-percent decrease in the 
level of improper payments for this particular program since 
last year's reporting.
    The Department of Housing and Urban Development has reduced 
improper payments in this program by more than $1.8 billion 
since 2000.
    Although several important programs such as the Earned 
Income Tax Credit and Old-Age and Survivors Disability 
Insurance reported increases in 2005, the governmentwide 
improper payment total is continuing to trend significantly 
downward.
    Our CFOs are working together with program officials to 
leverage new technologies and generate more cost-efficient 
methods for measuring and eliminating improper payments.
    Another critical accomplishment in fiscal year 2005 was 
that Federal agencies reported error measurements on an 
additional 17 programs.
    We have an error measurement in place for approximately 85 
percent of all payments deemed risk susceptible by Federal 
agencies. Although we are proud of this result, we are not 
satisfied with it.
    Also of note, and in direct response to suggestions made by 
this subcommittee at a previous hearing, agency reporting on 
improper payments to vendors is now included in our 
governmentwide reporting, providing a more complete picture on 
governmentwide improper payments.
    Specifically, Federal agencies reviewed $365 billion in 
vendor payments in fiscal year 2005. They identified $557 
million in improper payments, of which $467 million, or 84 
percent, has been recovered to date.
    Because 95 percent of the reported improper payment total 
continues to reside within seven programs, the first seven that 
we identified in 2004, OMB continues to focus on these 
particular agencies.
    Finally, the administration continues to pursue an 
aggressive legislative agenda in the improper payments arena 
with a series of program, with a series of program integrity 
reforms included in the President's 2007 budget.
    With the tools of the Improper Payments Act and this 
administration's management initiatives hand in hand in effect, 
the Federal Government is in a strong position to build on the 
dramatic reduction in improper payments achieved this year and 
to ensure that an error measurement is provided for all high-
risk programs. With the goal of ensuring that each taxpayer 
dollar is spent wisely, efficiently, and for the purpose for 
which it was originally intended, we remain committed to 
eliminating Federal improper payments. We look forward to 
continuing to work with you and this subcommittee and Congress 
to see that this objective is accomplished.
    Thank you, Mr. Chairman, for the opportunity to speak 
before you today. I am pleased to address any questions.
    [The prepared statement of Ms. Combs follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Platts. Thank you, Dr. Combs.
    Secretary Johnson.

                  STATEMENT OF CHARLES JOHNSON

    Mr. Johnson. Chairman Platts, Mr. Duncan, other members of 
the committee, I am delighted to be with you today. Thank you 
for the invitation. I am pleased to have Mr. Tim Hill adjacent 
to me. He is with the Centers for Medicare and Medicaid 
Services.
    I have only been at Health and Human Services less than 1 
year, but I spent considerable time looking at improper 
payments because of my strong belief that we have a genuine 
responsibility to the American taxpayer to protect their 
dollars.
    Although more must be done, I am very pleased with what has 
already been accomplished at Health and Human Services. let me 
review our seven improper payment programs to give you a status 
report, starting with our largest program, Medicare.
    The Department has been testing error rates in Medicare for 
10 years, going back to 1996. In my judgment, we have a mature, 
sophisticated program that is a model for the rest of the 
programs in our Department.
    In fiscal year 2005, we reported a Medicare fee-for-service 
error rate of 5.2 percent. That is a significant reduction from 
the 10.1 percent reported in the prior year. Now, this 
significant reduction can be attributed to the aggressive 
actions that we have taken to require adequate documentation. 
This does not necessarily translate into savings in the 
traditional sense, but no entity in the world should make 
payments without adequate documentation.
    Significant error rate reductions from this point will be 
more difficult to achieve, but we intend to remain aggressive. 
Beginning this year, HHS will produce error rates twice a year. 
This increased availability of data will help not only us by 
our contractors to better target efforts to reduce payment 
errors. We have also adopted more incentives for contractors to 
eliminate improper payments.
    Let me talk about the State Children's Health Insurance 
Program and Medicaid together.
    In Medicaid, we have used a number of different pilots and 
demonstration projects to eliminate improper payments for this 
State-operated program. Much was learned from these projects, 
and there is evidence that we have had a reduction in improper 
payments where those measures were used. Whereas, Medicare is a 
single, consistent Federal program, by design each State runs 
its Medicaid program differently. After much review, the 
Department made a wise decision. We have concluded that we have 
a successful methodology in Medicare, and if we replicate that 
50 times, we can achieve the same success in 50 States.
    We are now launched on a Medicaid error rate program that 
is certain to be successful because it is proven. Now, this has 
caused us some delay in our originally intended reporting 
dates, but it will prove to be worth it. In the meantime, we 
will have interim data that will be useful to HHS and to this 
committee.
    In 2006, contractors will measure national Medicaid error 
rates in 17 States, and by the end of fiscal year 2008, all 50 
States and the District of Columbia will be covered for both 
Medicaid and SCHIP.
    Let me cover the rest of the programs.
    Head Start: Under Head Start legislation, grantees are 
required to be monitored at least once every 3 years. We 
reported the Head Start payment error rate reduction from 3.9 
percent in fiscal year 2004 to 1.6 percent in fiscal year 2005, 
primarily achieved by reinforcing the requirement that 90 
percent of the served population must come from low-income 
families.
    Foster Care Program: In the Foster Care Program, we 
developed a methodology for estimating a national error rate 
centered around eligibility, and these eligibility reviews are 
required by regulation. The fiscal year 2004 rate was 10.3 
percent. That dropped to 8.6 percent in 2005.
    The Temporary Assistance for Needy Families, TANF Program. 
Although we have had many pilots which were successful, we have 
not yet identified an efficient and effective approach for 
determining an estimate of improper payments in the TANF 
Program. In the meantime, we have installed alternative 
procedures to stop improper payments immediately upon 
discovery.
    States are finding remarkable success in matching various 
data bases to look for individuals who are drawing benefits in 
more than one State, individuals who are employed in one State 
and drawing benefits in another State, and individuals who are 
newly employed and are not informing State officials. I am 
pretty excited about these data base matches.
    Child Care Program. As with TANF, the Child Care Program 
legislation gives the States great flexibility in the design 
and administration of the program. For child care, we have 
initiated an improper payment pilot in which 19 States have 
participated. Based upon these pilots, we believe we have a 
methodology to valuate participant eligibility, which we have 
determined to be our greatest risk area.
    In conclusion, Mr. Chairman, Mr. Duncan, the American 
taxpayer is well served by the money spent by HHS to combat 
improper payments and particularly health care fraud and abuse. 
Let me leave you with a very impressive recovery statistic. 
Since 1997, we have spent $5.7 billion on Medicare program 
integrity work and have recovered nearly $82 billion. That is a 
14:1 return rate over the life of this program.
    Thank you for the opportunity to give you an update on the 
Department's improper payment initiatives, and I will be 
pleased to answer any questions you may have.
    [The prepared statement of Mr. Johnson follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Platts. Thank you, Mr. Secretary.
    Mr. Williams.

                  STATEMENT OF McCOY WILLIAMS

    Mr. Williams. Thank you, Mr. Chairman, Congressman Duncan. 
I am pleased to be here today to discuss the governmentwide 
problem of improper payments in Federal programs and 
activities. Our work over the past several years has shown that 
improper payments are a long-standing, widespread, and 
significant problem in the Federal Government. The extent of 
the problem initially had been underestimated because only a 
limited number of agencies reported their annual payment 
accuracy rates and estimated improper payment amounts prior to 
the passage of the Improper Payments Information Act of 2002. 
Our work has also shown that primary causes of improper 
payments are lack of internal controls or a breakdown in 
existing controls.
    The act has increased visibility over improper payments to 
a higher, more appropriate level of importance. It requires 
executive agency heads, based on guidance from OMB, to identify 
programs and activities susceptible to significant improper 
payments, estimate amounts improperly paid, and report on the 
amounts of improper payments and their actions to reduce them. 
Further, in fiscal year 2005, OMB began to separately track the 
elimination of improper payments under the President's 
management agenda.
    Mr. Chairman, fiscal year 2005 marked the second year that 
Federal agencies governmentwide were required to report 
improper payment information in their performance and 
accountability reports. The governmentwide improper payment 
estimate for fiscal year 2005 exceeded $38 billion, but did not 
include any amounts for some of the highest risk programs, such 
as Medicaid, with outlays exceeding $181 billion for fiscal 
year 2005.
    While the Federal Government has made progress under the 
leadership of OMB, significant challenges remain to effectively 
achieve the goals of the act. For example, while progress has 
been made in identifying programs susceptible to the risk of 
improper payments, the full magnitude of the problem remains 
unknown because some agencies have not yet prepared estimates 
of improper payments for all of their programs. We note in my 
written statement that seven major agency programs with outlays 
totaling about $228 billion have not reported improper payment 
estimates. These agencies have been required to report this 
information since 2002 with their fiscal year 2003 budget 
submissions under previous OMB Circular A-11 requirements. 
Further, agency auditors have identified major management 
challenges related to agencies' improper payment estimating 
methodologies and internal control weaknesses for programs 
susceptible to significant improper payments.
    We recognize that measuring improper payments and designing 
and implementing actions to reduce them are not simple tasks 
and will not be easily accomplished. The ultimate success of 
the governmentwide effort to reduce improper payments depends 
on the level of importance each agency, the administration, and 
the Congress place on the efforts to implement the act.
    In closing, I want to thank you and the members of the 
subcommittee for your continued interest in this issue and 
providing important leadership and oversight. I look forward to 
continuing to work with this subcommittee as well as Federal 
agencies to help address this problem.
    This concludes my statement. I would be pleased to answer 
any questions that you or other members of the subcommittee may 
have.
    [The prepared statement of Mr. Williams follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Platts. Thank you, Mr. Williams. I appreciate all of 
your testimonies, as well as the written documentation you have 
given us. And where I would like to begin is, as I read through 
all the written testimonies last evening, a couple issues kind 
of jumped out and followup from where we were a year ago. And I 
think maybe, Dr. Combs, you in a broad sense and, Mr. 
Secretary, to you specifically, with your Department, you know, 
this act is now 4 years past its enactment, and yet we have 
seven agencies not reporting in any sense about their improper 
payments. And a good number of those are at HHS.
    I guess first, if we could start--you know, I read some of 
the explanation of where we are, especially with HHS and the 
cooperation of States when it is Medicaid and some of the 
Federal-State partnerships, but, you know, we still are 4 years 
down the line, and we are still talking about what we are going 
to do, and perhaps in 2007 or 2008 that we will start to see 
some estimates.
    I guess what I am looking for is a more specific answer to 
why it is taking so long in the general sense and then specific 
to HHS. Dr. Combs.
    Ms. Combs. I think that is certainly a valid question, and, 
Mr. Chairman, I certainly add my commendation to you and this 
committee for keeping this in the forefront of all of our 
minds, because a lot of what we can and should be doing in the 
departments and agencies, we must do as a continual 
partnership, and we truly appreciate the efforts of you and 
your staff in helping us with that.
    Mr. Platts. And I wanted to say up front that, one, I do 
not want to diminish the good-faith effort that OMB and the 
departments and agencies are making, and to acknowledge that 
progress has been made in the areas where we have been able to 
target it. And that kind of is the reason for the question. We 
are not able to maybe target if we do not actually have a good 
understanding of what is out there on some of these other 
areas. But I agree, it is a partnership, and it has been a very 
important working relationship between the departments, 
agencies, OMB, and this committee. I apologize for the 
interruption.
    Ms. Combs. No. Thank you, Mr. Chairman. I do not consider 
that an interruption at all. I look forward to this kind of 
dialog and continually having this kind of dialog as we work 
through these very, very tough issues together.
    I guess since we know my good friend Charlie Johnson is 
here and he represents what I consider to be some of the best 
of the best in the CFO community, and working with folks like 
him on a day-to-day basis in the CFO community and knowing of 
their commitment and their absolute resilience to making sure 
that we are doing better by the taxpayer's dollar on a day-to-
day basis, is an extremely important avenue for us to have and 
to continue to work through in these departments. And knowing 
he is going to be here to chime in on some of these more 
specifics, one of the things I would like to just put on the 
record and kind of step back for a minute and let us remind 
ourselves of is if you look at the total Federal outlays--and, 
Mr. Duncan, I specifically was intrigued by your discussion of 
how you continue to convey this to the American people, because 
that is very important for us as well.
    But if you look at the $2.5 trillion we have in outlays, 
and we know that beginning in 2004 we looked at $1.5 trillion 
of those, so we identified--about 60 percent of all of our 
Federal outlays were identified as being high risk susceptible.
    And if you take that down just another step, we had $1.2 
trillion or 85 percent of those that we are now looking at in 
terms of the error in our improper payments, we have error 
rates for 85 percent of that. And, in addition, we have also--
thanks to the help of this subcommittee, we have been looking 
at contract payments.
    So if you look at the 15 percent that we do not have 
measurements for right now that we are going to be addressing 
in future years, that 15 percent is $300 billion, and that is a 
lot of money by anybody's standards. But when you look at that 
and compare it to where we are stepping down from, and stepping 
down from that $2.5 trillion, that makes a lot of sense in 
terms of where we are. But we have about 28 percent or $659 
billion in contract payments that we have looked at.
    And then if you look at the rest of where that $2.5 
trillion is, you have about $341 billion or so in other 
payments that really are not related to improper payments. It 
is payments on the debt or compensation.
    So if you go back to the programs, just the programs that 
we are looking at, you see that we can look at ourselves and, 
in good faith, say, yes, we have really been doing a lot of 
good work here. And I think it is important to step back from 
the total corpus of what the total Federal outlays are and keep 
that in mind.
    So, yes, we are concerned about that remaining 15 percent. 
We are concerned about every single dollar there is. But we 
also recognize that we have done a lot, and we have a good plan 
and a good path out for addressing the total amount of improper 
payments we have.
    Mr. Platts. Dr. Combs, I would agree in the sense of the 
big picture governmentwide, now that we are in phase two, as 
you refer to it, and 85 percent. But if we get to specific 
programs--and I will stay aside from HHS before we get to the 
Secretary--Agriculture and HUD, if you looked at their specific 
programs, you could say, well, in 4 years we have made zero 
progress to their specific programs, meaning we are 4 years 
down the road without any reporting on possible improper 
payments at all.
    So while, again, in the big picture we have made progress, 
but my question is: Why is, you know, the school programs, why 
at HUD the CDBG, you know, specifically them? The law says, you 
know, annually they will report on the susceptibility of 
improper payments. OMB moved forward in a very timely fashion, 
developed the regs and issued them in 2003. Yet 3 years later, 
those specific programs have not yet fulfilled the requirements 
of the law or OMB's regulations.
    Ms. Combs. Well, I agree with you that we have to continue 
to focus on those, and we are doing that. But I think the 
measurements of improper payments for these particular programs 
is due particularly in large part to the size and the 
complexity of these programs as well as some resource and 
timing issues. Because of the complexity, it is taking a lot 
longer in many of these programs to get where we need to be.
    Mr. Platts. In several of the programs, prior to the 
Improper Payments Act being passed, OMB was already requiring 
them, through an administrative requirement, to report. And so 
it was not even something new. In essence, they were supposed 
to be doing this already through administrative action or 
executive action.
    If we look at specifically Department of Ag. and school 
programs, what has been done for 4 years? You know, and I 
guess--is there a plan that has been laid out back in 2003 
saying, all right, here is our programs, and here is how we are 
going to chip away at getting to a plan, and they actually have 
now for 3 years worked on that plan to where they are getting 
to where they say in 2007 they think they can finally give an 
estimate? Or was there problems along the way that they did not 
get started to 2004 or 2005, or they started and changed plans?
    I know we are going to get into some of that detail. You do 
in your written statement with HHS. And maybe that is--maybe we 
want to jump over to HHS and give us some of that detail for 
your specific programs with the majority of them being at your 
Department.
    Ms. Combs. Let me, just before my friend Charlie says that.
    Mr. Johnson. Sure.
    Ms. Combs. One of the things you are going to hear from 
Charlie is what you just asked for, Mr. Chairman, in terms of 
the plan and a very well laid out plan. Those are the kinds of 
things that are going on in these other departments, too. It is 
not like we are ignoring those by any stretch of the 
imagination. We have----
    Mr. Platts. Were they going on--I mean, since 2003 and 3 
years we are still working on the plan?
    Ms. Combs. I think you will understand better when my 
friend Charlie Johnson talks about the complexity of their 
program and their plan. The complexity of the situations that 
you have just talked is very similar, and what you also need to 
understand is that we really are firm believers in putting 
people on this plan, and we have a plan in place, and we hold 
people accountable for coming to us and explaining where they 
are at each step along the way on these plans.
    Thank you.
    Mr. Platts. And I appreciate the gentleman from Tennessee's 
indulgence as I know I am way over my initial round, so thank 
you.
    Mr. Johnson. Your question is a very legitimate question. 
The same question I asked when I came in and why is it 4 years 
after the passage of this act and we are not completed in 
Health and Human Services. And I have studied that, and I have 
learned a lot about it.
    First and foremost, a program that is solely within our 
direction, Medicare, we did start that process in 1996. And as 
I indicated in my testimony, we have a very sophisticated 
program, but that is a program solely within our control. We 
design it, we test it, we spend the money for testing improper 
errors.
    Then we move from there to State programs where we are 
participating with States, and I spent the first part of my 
government career as chief of staff to Secretary Leavitt when 
he was Governor of the State of Utah. So I know the State side 
of this, and I guess I have a little bit of appreciation.
    But if you take Medicaid, I believe every State has in some 
sense been trying to reduce improper payments in Medicaid. I 
believe they have been trying in TANF and child care and 
adoptions and SCHIP. The difference is when you get down to 
trying to get a statistically valid error rate that you can 
present for the Federal Government as a role--as a total with 
50 different States, that becomes a lot more complicated. And 
if we take Medicaid, we have had a lot of programs. We have had 
PAM and PERM, and we finally decided, look, this is very much 
like Medicare except it is 50 different Medicares instead of 
one Medicare. Let's take something that is proven and now start 
using that program. But that is an evolution. People go down 
paths with good intent, always with good intent, and with good 
results by the way.
    We do not have a statistically valid number to give you, 
but I can tell you that these front-end efforts have reduced 
improper payments, but we cannot tell you by how much. So we 
have now a plan, and it is in process. We are in process now on 
the Medicaid.
    When you get to TANF and Child Care, by design the Congress 
has said we want States to have a lot of rights in not only 
design of that, but in less interference from the Federal 
Government. There are certain things we can ask for and certain 
things that we cannot. But that is by design. And I understand 
that.
    So we need to--we have been working for a way to come up 
with good improper payment rates without asking for legislation 
that forces this upon the States. We have tried to work very 
cooperatively with the States. Again, I think we have--in each 
of those programs, we now have a plan. But this has been 
evolutionary, and this has taken some time. In the meantime, I 
can tell you that some of these tools that we have used, we 
have had significant recoveries.
    I was talking about, you know, the State programs using 
these data matchings. There are millions--Pennsylvania I think 
was $44 million in matches that they have saved in the TANF 
program.
    Now, we cannot report that to you as something that is a 
reduction in an error rate that we had a baseline and we can 
tell you it has moved from this percent to this new percent. 
But I can tell you a lot of good things are going on.
    But at the end, I have to say we are where we are at HHS, 
and I think we now have a place to go forward from that will 
get us to where we need to be. But it has been a long and 
almost tortuous process to get there, and I concede that.
    Mr. Platts. And I certainly appreciate, Mr. Secretary, the 
challenge when it is State programs, and that, I guess two 
followups, and you kind of touched on the one. While there 
certainly needs to be a respect, having come out of the State 
House myself, and, you know, States having some autonomy of how 
they operate, but the ability of HHS to say, without even 
legislation, you certainly have the responsibility of ensuring 
against fraud and waste and mismanagement, which would seem to 
give you the authority to say to fulfill that statutory 
requirement of guarding against that, that this is, you know, a 
requirement to participate, because it seems like in the 
various programs, the problem has been getting the States 
actually to participate in TANF specifically where in 
contacting States that, you know, not many took you up on it, 
you know, even when you reached out and maybe explained the 
benefits of it; whereas, in the D.C. pilot, in the new hires 
match, I mean, the numbers are pretty staggering.
    Mr. Johnson. They are staggering.
    Mr. Platts. Once they ran the program of cutting out the 
fraud, in essence, that was going on, and by your testimony, it 
is, I think, 31 States, D.C. and Puerto Rico have conducted a 
State match. What is the reason you are given for the other 19 
States for saying, no, we do not want to save money?
    Mr. Johnson. And, again, I think this is one that it 
builds. I think you will have another 19 States aboard. We are 
bringing States in. We are training them on these data match 
programs. We are showing them the benefits of Pennsylvania, and 
New York was, again, a very large number.
    So I think it is--I call it ``marketing.'' You know, we 
have to market these programs, and we are doing that in a much 
more aggressive fashion.
    Mr. Platts. Because, I mean, if you look at just the D.C. 
pilot, a third of the individuals were submitted for the match, 
and over 80 percent of those, so basically 25 percent of all 
were actually employed based on that pilot. I mean, that is a 
huge percentage that were taking advantage of the system.
    Mr. Johnson. And it is, and that is why States are finding 
success with this. They have new hires matches, and the more 
States that get in, then the more people we pick up, because if 
somebody vacations in Florida and lives in Pennsylvania, they 
may be getting benefits both places. And when you get both 
States in it, then it becomes more robust and much more useful. 
So, again, it is building but we are not there, and I can see 
that.
    Mr. Platts. Well, and I appreciate being in the position 
for the past year, and your jumping into this and being 
aggressive is something I appreciate because as the numbers 
tell us, these State-partnered programs are critical to get in 
that other 15 percent. I mean, you look at the numbers, you 
know, Medicaid in particular is the big one. And when we have 
had Comptroller General Walker here and we talk about the 
fiscal challenges, you know, facing our country, Social 
Security is a problem. Medicare and Medicaid are terrifying. 
You know, those are the fiscal disasters that are coming 
without changes. And if we just extrapolate the percentage of 
the $1.2 trillion that we have looked at over to $38 billion, 
if you extract that to the remaining $300 million to go after--
or $300 billion, we are talking maybe another $10 billion on a 
conservative end of improper payments, and maybe even more 
because of the type programs being State partnership that there 
may be a higher propensity. Those are huge sums.
    Mr. Johnson. They are. And I think helping to mitigate will 
be some of these programs that we had put in place, because we 
are going to have huge increases. I mean, Part D is a huge new 
increase.
    Mr. Platts. Absolutely.
    Mr. Johnson. Managed care is growing. But some of the data 
mining and some of the things we are doing to check trans-
analysis, claims behaviors, and some of those things will help 
us detect it in advance rather than--help us to prevent it in 
advance rather than have to detect it later on.
    Mr. Platts. Right.
    Mr. Johnson. That is our goal. Let's stop it at the 
beginning point.
    Mr. Platts. I have some followup questions, but I have 
overstayed my first round of questions already, and I would 
like to recognize the gentleman from Tennessee, Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman. And 
you mentioned Mr. Walker, and he has appeared before this 
subcommittee and some other subcommittees that I am on, and I 
think he is--I really admire and respect his attempt to be a 
Paul Revere to try to alert the country to the tremendous 
financial problems that we are facing for unfunded pension 
liabilities and all sorts of things. And, in fact, I don't know 
how in the world we are going to pay all these military 
pensions, civil service pensions, Social Security, Medicare, 
Medicaid, prescription drug benefits with money that means 
anything within a few short years. But at least I do appreciate 
the progress that has been made since our last hearing, and I 
appreciate the progress that, Mr. Johnson, your Department has 
made. And like you, it sounds hopeful, this new data base 
information that you are talking about to try to overcome the 
duplication of benefits that people might be receiving.
    But the GAO report, Dr. Combs, says, ``However, the 
magnitude of the governmentwide improper payment problem 
remains unknown. This is because, in addition to not assessing 
all programs, some agencies had not yet prepared estimates of 
significant improper payments for all programs determined to be 
at risk.''
    Do you disagree with those statements? And assuming that 
you do not, how close do you think we are to getting a handle 
on this problem, particularly the magnitude of the problem?
    Ms. Combs. I think we certainly do understand that there 
are about 10 programs out there that--many of which, and one 
you just--or two you just head about here--represent about two-
thirds of those 10 programs that we just do not know about yet. 
How close do I think we are? I think we are pretty close, 
because when you think about the kinds of error rates that we 
have found and the risk susceptibilities that we found, when we 
first went out and identified 60 percent of all of our outlays 
as being risk susceptible, that was a pretty high amount. And 
now, you know, of that 60 percent, we are into the 85-percent 
category of really knowing what those improper payments are.
    And many of these programs over time have had some 
measures, and many of them have been pretty stable over time--
some of the very, very large ones, anyway. So----
    Mr. Duncan. Well, how do we know that--how do we know that 
these reports are accurate? I mean, you know, a lot of people 
feel that to really get a true picture in an accounting 
situation, you have to have some outside auditor, not somebody 
that is inside. And, of course, then we have established over 
the last few years all these Inspectors General in all these 
departments because we were not satisfied with the accuracy of 
the information we were getting from some of these departments 
themselves.
    Have the Inspectors General in these various departments or 
agencies been involved in this process? Or how satisfied are 
you with the accuracy of the reports?
    Ms. Combs. I am satisfied that we continue to improve that 
accuracy, and in the departments and agencies that we do the 
best, we have Inspectors General that work hand in hand with 
our CFOs and with program managers to help them with their risk 
assessments. They help them look at the improper payments as 
well as other internal control mechanisms that they need to be 
employing. And I think since 2004, this agency reporting has 
improved significantly. Inspectors General look at these 
reports, as do we, to see if they pass the reliability test, so 
to speak. And I think that the effective practices that we 
continue to see are strengthened and expanded every year. And 
as I said, the programs and the departments that seem to do the 
best with these are the ones where we see a close collaboration 
and a close working relationship between the CFO and the 
Inspectors General.
    Mr. Duncan. So we can feel that the OMB is sort of the 
outside agency, and GAO and the Inspectors General, that we 
really don't need to require some sort of outside audits of 
some of these programs. Yes, Mr. Johnson?
    Mr. Johnson. I was just going to say, we have used an 
outside auditor for this very purpose. In Medicare, our 
Inspector General started this system in 1996, and then we have 
developed it to a point where it became ready to go prime time, 
they have signed off. Then we brought PricewaterhouseCoopers in 
to also evaluate, and they have also signed off. So we have 
used both Inspector General and the outside auditors that you 
are talking about for that particular program. That is why we 
know this one works, and that is why we want to replicate it in 
the Medicaid area.
    Mr. Duncan. All right. Well, I noticed that of the seven 
major programs, you have--and you know, everybody in the 
Congress wants to do all we can for the veterans, but--and, of 
course, in this country--I do not guess there is any developed 
nation that even does 10 percent of what we do for our 
veterans. But I noticed--but that is an awfully big Department, 
but they are not in here. Why is that, Mr. Williams? Are they 
just doing a fantastic job where some of these others are not? 
Or what can you tell us about that?
    Mr. Williams. Congressman Duncan, actually when you look at 
the $38 billion, there are three programs from the Department 
of Defense that are actually reported that they had programs 
with significant improper payments--that actually reported 
amounts. It was the health, the benefits, and military pay--
military pay being a new program that reported this year.
    Mr. Duncan. So they are included in the----
    Mr. Williams. I think the schedule you are looking at are 
the ones that did not report that were required to report. But 
as far as those that actually did report, there were three 
programs that defense reported this year. There were two 
programs last year. Military pay is----
    Mr. Duncan. Well, no, what I am looking at, it says 
improper payments reported in fiscal year 2005, and it says 95 
percent were from Medicare, Earned Income Tax Credit, Old Age 
and Survivors' Disability Insurance, Unemployment Insurance, 
Supplemental Security Income, Public Housing, Rental 
Assistance, and Food Stamps. They could be--what you are 
talking about could be in the ``Other'' programs, which is 5 
percent. Is that right?
    Mr. Williams. That is correct. That is correct.
    Mr. Duncan. OK.
    Ms. Combs. The first seven programs that were assessed, Mr. 
Duncan, that you are referring to, I think you are referring to 
VA benefits as opposed to DOD. Is that correct?
    Mr. Duncan. Yes.
    Ms. Combs. It is included in this slice of the pie up here 
with ``Other.''
    Mr. Duncan. Well, of course, I am also--I am interested in 
any of these departments as to, you know, what amounts they are 
reporting and whether they are reporting accurately and what 
they are reporting. Talk about Mr. Walker. I remember at 
another subcommittee of this committee, he told us one time 
that the Defense--he was the Inspector General of the Defense 
Department before he became head of the GAO, and he told us 
that the Defense Department has misspent $35 billion in Iraq 
and had lost another $9 billion that they just could not even 
account for. That is $44 billion.
    Of course, I also remember when I heard Charlie Cook, the 
respected political analyst, in a talk one time, and he said he 
did not think it was humanly possible to comprehend any figure 
over $1 billion. And I am not sure that you even can comprehend 
$1 billion.
    Now, Medicaid has not given us an estimate. Is that 
correct?
    Mr. Johnson. That is correct.
    Mr. Duncan. Well, Mr. Williams, have the States been 
cooperative in providing that information, or what is the 
problem?
    Mr. Williams. We have another assignment in which we have 
looked at the various steps and actions that States have taken. 
States have actually been working to try to identify ways in 
which they can do risk assessments. It is kind of a mixed bag 
as far as the progress that they have made. In surveys that we 
did, they basically stated that in doing this particular 
process and trying to identify improper payments, that there 
were various areas in which the Federal Government could assist 
them.
    Of course, one of the first things that we always heard was 
more money could help us out in this process to help people to 
work on identifying the improper payments. But they also 
requested assistance in the area of additional guidance, 
clarification on guidance that is provided from the Federal 
Government. And also in looking at this process, one thing that 
we, GAO as an organization, looked at was the possibility of 
more coordination between the Federal Government and the 
States, looking at best practices, opening communications, and 
working at the State and Federal agencies to make sure that 
those best practices are out there and, what is working in one 
area, that information is spread throughout the rest of the 
States so that every effort can be made to reduce this number 
to a manageable number.
    Mr. Duncan. Well, you know, when you say that they say they 
do not have enough money, this is my 18th year in the Congress, 
and I cannot tell you how many times I have heard over the 
years, every time there is a problem, no matter what the 
problem is, they tell us one of two things: either they do not 
have enough money, they are underfunded; or their computers are 
obsolete. [Laughter.]
    I mean, it amazes me.
    Now, I will tell you that I read in the Knoxville News 
Sentinel, though, a few days ago--they have a Thought of the 
Day, and they said, ``To err is human. To err completely 
requires a computer.'' [Laughter.]
    I put out a newsletter, like I said, with no pictures or 
anything, and I cover about 30 topics or so each time I do it, 
in just kind of a short way. But I will read one little part of 
this part that I wrote about our hearing last year. ``One of 
the largest programs, Medicaid, at $175 billion, could not even 
be measured. Two days before our hearing, the New York Times 
completed a year-long investigation of the Medicaid program in 
New York and found billions in fraud and abuse. The chief 
investigator estimated at least 10 percent in criminal fraud 
and another 20 percent in improper payments. If this figure is 
nationwide, this would mean over $50 billion in the Medicaid 
program alone that was not included in the $45.1 billion 
mentioned above.'' The $45.1 billion was the figure that we had 
last year that there has been this progress on.
    I mean, was the New York Times--do you think they were way 
off base? You know, I do not suppose we are really going to 
know this problem and how big it is until we find out a little 
bit more about this Medicaid. Do you all think that there is 
any possibility that the New York Times was right and that 
there could be a 20-percent improper payment figure on Medicaid 
nationwide?
    Mr. Johnson. I am going to ask Mr. Hill to answer that. I 
can tell you that there are--because I do not want to 
speculate, but I can tell you that we have some programs, for 
example, where we match Medicare recipients against Medicaid 
recipients, the so-called Medi-Medi program. And we do find a 
lot of Medicaid errors in that situation, where people are 
drawing, you know, both. And so I think it is fertile ground, 
but States have an incentive to control that because they get 
to keep the money. They keep their share of the funding. And so 
they are not without great incentives and great rewards.
    I would mention also that you had talked about more money. 
In your Deficit Reduction Act, you did give some funding now 
for Medicaid integrity. I think it is $5 million the first year 
and then $50 million each year thereafter for the next 4 or 5 
years.
    But, Tim, Mr. Hill, would you care to speculate on the New 
York situation?
    Mr. Hill. I think I would be surprised, quite frankly, if 
the rate was 20 percent across the country. I think that in New 
York in particular, when you have an investigator who wants to 
make a point----
    Mr. Duncan. Surely you would not question the New York 
Times, would you, Mr. Hill? [Laughter.]
    Mr. Hill. I do not question the press. But I would say, 
speaking to Mr. Williams' point, and as Charlie highlighted, 
the DRA provided significant resources to do a lot of the 
things that the GAO has asked of us, sort of working with the 
States to export best practices across the States, match data 
to be sure that the States have everything that they need to 
continue the incentives that they have to find the improper 
payments that are there, because as Secretary Johnson said, 
they have as much, probably more incentive than the Federal 
Government does to find and eliminate improper payments because 
their budgets are as strapped or perhaps even more strapped 
than the Federal Government's. And so they definitely have a 
vested interest in finding those improper payments.
    Mr. Duncan. You know, I do not hear anything from Medicaid 
people on their bills, but I sure hear from a lot of senior 
citizens who are upset about things that they find on their 
hospital and medical bills that they think--services or things 
that they think they never received that popped up. I do not 
know how widespread that is, but well, all right, thank you 
very much. It does sound like we are making some progress. I 
hope, Mr. Chairman, you will keep moving on this and 
particularly that we need to followup with some of these 
agencies and departments that are not reporting and see what we 
can find out about that.
    Mr. Platts. Well, Mr. Duncan, that is actually my next 
focus, the fact that eight of the departments say they have no 
programs susceptible to improper payments, and two in 
particular I would like to focus on, and probably, Dr. Combs 
and Mr. Williams, if you want to comment. According to the 
information, DHS is a Department with about $40 billion in 
outlays saying they have no improper payments--or no programs 
susceptible to improper payments. In the 2005 audit, the 
auditor said that--cited DHS as being in noncompliance with the 
Improper Payments Information Act and went on to say that it 
failed to institute a systematic method of reviewing its 
programs and identifying those it believed were susceptible to 
significant erroneous payments and for not performing test work 
to evaluate improper payments for all of its material programs.
    So, you know, in the number we have, it is encouraging--and 
I want to get into even the drop that we see from 45 to roughly 
38.5, but part of that number last year and again this year is 
these two programs, DHS. And we know that the auditor is saying 
they actually did not comply with the law, yet they get the 
report saying we do not have any programs, and then for DHS 
specifically, you know, we look at GAO's review of the Katrina 
relief, and just in one program, the Individuals and Households 
Program, where there were significant flaws found and about 
$5.5 billion was given, and just in the one aspect of that, the 
debit card recipients, that 5,000 of the 11,000, so almost half 
of the recipients gave false names, addresses, Social Security 
numbers.
    So, I mean, we have clear evidence of improper payments, 
yet we have the Department saying we do not have any programs 
susceptible. So how does the Department get away with saying 
it? And what does OMB do in response to their saying they have 
no programs, yet the auditor says, well, you did not even 
follow the law, and GAO has found evidence that, yes, they have 
significant improper payments being made?
    Ms. Combs. Thank you for asking about that because, one, we 
are pleased a risk analysis was done at DHS, but we, too, have 
concerns that there needs to be a deeper look at DHS. We have 
talked with them. We know that there are a couple components 
they have reported on. We are pleased with that. We have an 
assessment of the situation there, and through their PAR, of 
course, they report on this. But more importantly, and 
consistently throughout the year, they report through the 
President's management agenda. And we have asked them to look 
at closing the reporting gaps that have been identified by the 
Inspector General, and we have looked at their plans. We 
continue to work with them on their plans. And we are 
continuing to hold them accountable to expanding both their 
recovery audits as well as--well, particularly their recovery 
audits because a lot of what they do is contracting. But we 
have also asked them to do a deeper dive into their program 
areas and to give us their plan on that as well.
    Mr. Platts. So exactly what message is conveyed from OMB to 
the DHS Secretary and then his subordinates that, you know, you 
have given us, OMB and the American people, a statement that 
you have no programs, but we know from your audit you actually 
did not do what you needed to do to make that assessment? In 
essence, I guess what I am asking, in this specific case--and 
it really relates to a broader--because at HHS, while I may not 
be pleased that we are 4 years down the road and we are talking 
maybe another 2 or 3 years before we get to where we want to 
be, but there seems to be an acknowledgment of the risk out 
there and a good-faith effort to get their hands around it. 
With DHS it seems they are just saying, hey, you know, we are 
not at risk, even though we know they did not comply with the 
law. So what consequences? Was there any recommendation that 
the CFO be reprimanded, that, you know, any Secretary, 
Assistant Secretary, anybody be held accountable for failing to 
comply with the law as the auditor is telling the Department 
did?
    Ms. Combs. Well, I think the corrective action plans that 
we require them to do are looked at by the highest levels in 
the agency, and certainly one of the things that we are asking 
them to put these tools in place, such as the accurate 
measurements and to really assess and dive deeper into their 
analysis.
    We have the same concerns that you are expressing regarding 
the particular analysis that was done, and I do know that 
particularly in the one program--and I assume you are 
specifically referring to FEMA when you talk about that.
    Mr. Platts. Right.
    Ms. Combs. We know that they have already put a measure on 
the street to go in and look at that, much like what Secretary 
Johnson talked about in terms of the assessment that they do 
with the internal controls. We know that those kinds of things 
are taking place. Are they taking place at the speed which we 
would hope and we would like? Not necessarily, and that is why 
we are asking them and holding them accountable for that.
    Mr. Platts. And one of your challenges, Dr. Combs, is--you 
have been asked today and regularly to defend the actions of 
others that you do not have direct say over, and I would not 
want to be in your seat.
    Ms. Combs. Well, I can assure you, this is the first 
experience--normally, in my entire career, I have been in line 
management jobs, and it is a bit different.
    Mr. Platts. And I guess my belief--and in this case, it is 
dealing with improper payments. At other times it is 
mismanagement of financial management programs being not well 
planned and GAO has assisted us in what should be done up front 
that, unfortunately, many times has not been done, and so we 
spend millions and realize it will not work.
    But does OMB--I mean, you are the one who is given this 
information, and then you are called on to respond about it in 
this case. It seems to me that it would be appropriate of OMB 
to go to the White House and say, listen, you know, the 
President's management agenda, this Department is not 
fulfilling the requirements of the law, 2002, or the 
regulations that OMB has passed pursuant to law. And the White 
House needs to get engaged and say to Secretary Chertoff and 
his subordinates, Follow the law or else.
    I appreciate that there is--as we are doing oversight, you 
do, in essence, oversight. But it is kind of on an even playing 
field. Unless it comes from the White House back down, it is 
equal partners to some degree. Is there any of that kind of 
dialog to try to pursue consequences for a major Department 
spending $40 billion, not following the law, to be held 
accountable from the Secretary on down for what the auditor 
tells us is violation of Federal law?
    Ms. Combs. I can assure you that the President's management 
agenda is taken seriously by the Department, and when and if 
you ever or GAO or the internal Inspector General find things 
that really need to be followed up on, those are followed up on 
by senior-level people talking to senior-level people in those 
departments and agencies. The transparency that is created by 
the President's management agenda where people are given scores 
and it is publicly held out there for everybody to see, says to 
everyone we are expecting and demanding of you the kind of 
behaviors and the kinds of efficiencies that you are demanding 
as well.
    Mr. Platts. In those scores--and, actually, one of the 
things I did not understand. In my understanding, in the 
current eliminating improper payments scorecard, DHS actually 
has moved up to a yellow. I guess I was not certain of how they 
get a yellow when the 2005 audit is telling us, well, they are 
actually not doing the test procedures, they are not complying 
with the law. So what is it that they did that allowed them to 
move up on the scorecard, despite not complying with the laws 
and OMB regs?
    Ms. Combs. There is a plan that they have presented to us, 
and those are assessed at least quarterly for every department, 
and some departments we look at on a monthly basis because we 
feel like we cannot let a quarter go by. We just need to 
address the accountability issues more frequently than that.
    But the things that they are held accountable for are 
presenting a plan where they will show certain progress, and if 
they achieve certain progress on the accurate measurement of 
their high-risk programs, for example, or sound corrective 
action plans toward reduction targets would put them in yellow. 
But that is only a quarterly score, and if they do not meet or 
keep up the next quarter's or the next month's even plan 
relative to that, then, of course, we use those scores to move 
them back to red.
    In this particular case, they had certain deliverables that 
they were presenting to us. We held them accountable for those, 
and we found that they had achieved those specific 
deliverables. And that is why they were rated yellow.
    Mr. Platts. And that would be, in essence, since the bulk 
of the 205 year, which is what the auditor was looking at, 
those are encouraging words, perhaps, that they are moving 
forward with the plan.
    Ms. Combs. Yes.
    Mr. Platts. Even if they were not in compliance in 2005, 
that they are working toward compliance.
    Ms. Combs. Yes.
    Mr. Platts. Am I taking that----
    Ms. Combs. You are taking that exactly correctly. I think 
Secretary Johnson will know, as I, too, have been the receiver 
of those scores when I was CFO, a little bit of a help and push 
to say, OK, you are on the right path now, we want you to stay 
there, is a big help to many of the people who are responsible 
for doing this in the departments and agencies.
    Mr. Duncan. Mr. Chairman, I have some people waiting for 
me. Can I get into one----
    Mr. Platts. Yes, please do.
    Mr. Duncan. I assume that just about everybody here knows 
this, but there might be somebody here who does not, that we 
are talking about not just payments to beneficiaries but 
improper payments to employees and also Government contractors. 
But what I am interested in, Mr. Williams, last year, we were 
given language by the GAO that said that the agencies found 
that more than 60 percent of Government outlays for fiscal year 
2004 are $1.4 trillion, now $2.3 trillion, is at risk for a 
significant level of improper payments.
    Now, do you know where that figure came from? Or has that 
figure gone down, or is that still basically--and by saying it 
is at significant risk I assume does not mean that--I mean, I 
know it does not mean that much was made--was improperly paid, 
but that is what is at risk.
    Mr. Williams. That number is based on the agencies, the 
individual agencies, doing their own assessments. And it is 
just a compilation of pulling together that information from 
all of the major agencies within the Federal Government.
    Mr. Duncan. And how do you think that was--maybe you do not 
know, but how do you think that was determined? In other words, 
in one respect that is a real high figure. On the other hand, I 
guess depending on how you define the words, you could say that 
100 percent of the Federal budget was at risk for improper 
payments, could you not?
    Mr. Williams. I think what you have here is a process in 
which, first of all, we have not--at GAO we have not done an 
assessment of drilling down and looking at that particular 
process. But it is obvious that when you are doing a risk 
assessment and you are looking at this process across as many 
agencies that we have in the Federal Government, that there is 
probably some variation in the methodology, the processes, and 
the procedures as to how to go about doing the assessments. But 
we have not drilled down.
    What we have done, as far as this particular legislation is 
concerned, is in the initial stages we have focused on what we 
think is the big picture, and that is looking at the major 
components of the legislation, what agencies are required to 
do, and based on that we are looking at are they actually 
reporting, are they doing the assessments, to get past that 
first phase and then what we would anticipate as we get down 
the road is to start taking a closer look at some of the 
specifics that are called for, such as what is the quality of 
the risk assessment.
    For example, you had mentioned a while ago about the 
auditors actually attesting to whether these are reasonable 
numbers or not. I would say in that particular area that you 
probably have a process in which what we have done is looked at 
what the auditors have said, and we have had no reason to doubt 
their statements that they have made in their reports. And a 
couple examples that we were just talking about here was the 
Department of Homeland Security in which there was no number 
reported, and yet the auditor stated that the overall 
assessment could be improved, is one way of putting it.
    Another one was the Department of Justice. If my memory 
serves me correctly, it basically fell into that same category 
of that group of eight that said that they had no programs that 
were susceptible to significant risk. Yet the auditors in their 
report identified a particular program in which there was no 
risk assessment.
    I think it is too soon--and I will link in one of the other 
questions that you asked also as to what do we think that 
number should be. Should it be as high as $50 billion? I think 
it is too soon to tell exactly what that number should be. I 
think that there are a lot of things that still need to be done 
in order for us as a Federal Government to get our hands around 
this particular process. Those are just a few of the things I 
just mentioned right then. We have not looked at all of the 
programs. I do not know if I am comfortable as an auditor--or I 
cannot say as an auditor at this particular point in time that 
I am comfortable that the risk assessments that are going on 
across the various agencies is something that I am comfortable 
with. I think you can just look at the conversation that we had 
a few minutes ago about the Department of Homeland Security.
    There are other factors that I think would need to be 
looked at when we start talking about this area because there 
has been discussion in the past about the issue of significant 
improper payments. There are various things that could go on as 
far as, you know, how you look at the word ``significant.'' I 
can give you an example of where we currently have the criteria 
of $10 million and 2.5 percent. I think there are a couple of 
ways that you can look at that. If you have a program--if you 
have an organization that has 10 programs and in order to hit 
that 2.5 percent, you would have to also have $10 million. And 
each 1 of those 10 programs came in at 2.4 percent, and they 
came in at $9.9 million. When you put them all together as an 
agency, you are talking $100 million, yet none of them would 
have to report under the requirement that we have here.
    So there are a lot of things that I think we have to still 
take a hard look at, continue to work toward the progress that 
we have seen over the last year before we can be in a position 
to say with what I would call good confidence that we have a 
handle as to what that number really is. I think there are just 
too many uncertainties right now and too much work still to be 
done.
    Mr. Duncan. Let me just conclude, because I am already 
running late, but because of what I said at the start of this 
about the financial condition of the Federal Government, which 
we all know about, I do not see how any work that you could be 
doing would be more important than trying to get a handle on 
this problem and doing something about it. And I appreciate the 
work that you all are doing and the progress that has been 
made.
    Obviously, though, the problem is much bigger than the $45 
billion down to the $37 billion that we are talking about here 
today, as good as that is, I mean, because if you have 
potentially even more waste than that and fraud than that in 
just the Medicaid program, and then we have so many other 
departments or agencies or programs that are not reporting. But 
I sure hope that we keep on working on this and hopefully do 
even better in the future.
    Thank you very much, Mr. Chairman.
    Mr. Platts. Thank you, Mr. Duncan. Again, appreciate your 
participation. I want to come back where I was on the issue of 
those that report that they don't have anything at risk, like 
DHS. One of the reasons I ask specifically about what followup 
happens between OMB and the departments when they come back and 
say that is in a visit to a NASA center, and I asked the CFO 
about their improper payments, you know, with a lot of 
contracting and things, you know, what it was, and the response 
was, ``We don't have any.'' And I said, ``Well, how do you know 
that?'' And the response is, ``Well, we just don't have any.'' 
In other words, it didn't leave me very reassured that there 
was actually what the act requires, a review, a risk assessment 
actually done. That is what worries me when I see eight, one of 
them DHS, which has FEMA in and of itself, that says, ``We 
don't have any,'' and especially when you look at the whole TSA 
aspect of contracts that we know, huge sums that were made 
inappropriately.
    I want to make sure that, Dr. Combs, from what your 
testimony was, that those eight that are saying that, that 
there is a healthy dialog, interaction between OMB and those to 
really be looking at how they come to that conclusion and how 
they are going to substantiate that conclusion. And I am 
correct in that understanding, that dialog is occurring?
    Ms. Combs. You are correct that dialog is occurring and 
will continue to occur. NASA, you mentioned them specifically, 
they had reported under the recovery audit, and I'm not quite 
sure what the person meant that they didn't have any, but 
consistent with the recovery auditing requirement, the outlays 
that we notice from NASA are, of course, primarily in the 
administrative and contract funds, and those are being 
monitored very, very carefully and will continue to be.
    Mr. Platts. And that actually is the followup on NASA 
specific, and, Mr. Williams, I am going to eventually get to 
you on DHS and NASA, but recovery audits is one of the other 
areas I wanted to touch on, and specifically with NASA, because 
my understanding that the amount subject to review for NASA was 
about $12 billion, and yet they only reviewed about $82 million 
worth of the contracts, and have they given you an explanation? 
Are you aware of an explanation of why they reviewed, as part 
of the recovery audit process, such a small fraction of what 
was eligible for review?
    Ms. Combs. I think the amount that they identified for 
recovery was $617.
    Mr. Platts. Right, $617,000.
    Ms. Combs. And they recovered that entire amount.
    Mr. Platts. Out of the $82 million they reviewed, but there 
was about $11.3 billion that they chose not to review.
    Ms. Combs. Correct.
    Mr. Platts. Why, with the ability and authority to do it, 
is there any reason you are aware of that they have not engaged 
in that review, as the law provides for?
    Ms. Combs. I think one of the things that is on their plan, 
in fact, I am sure of it, for 2006, right now, is that they are 
reporting on their overall spending this year in 2006, and 
they're going to include even more contracting categories in 
their review this year, and that is the kind of dialog we are 
continuing to have with them on this particular issue. And we 
just need further expansion from them on this. I agree with you 
on that.
    Mr. Platts. So on the 2006 part we would expect to see a 
much larger number actually reviewed than we did?
    Ms. Combs. Yes.
    Mr. Platts. And that is the type of direction we want to 
see.
    Ms. Combs. That is right.
    Mr. Platts. Is that we use the tools that have been given 
to all of us to pursue the worries out there, because of the 
$300 billion that was reviewed, I guess, about a half billion 
was found to be inappropriate and was collected. I think $557 
million was identified as improper, of which $467 million was 
then----
    Ms. Combs. Was actually recovered.
    Mr. Platts [continuing]. Recovered, which is great for the 
American taxpayer. Again, I do a lot of extrapolation of 
numbers, and I know that could be dangerous, but if it 
extrapolate that $300 billion reviewed and a half billion 
recovered, if I extrapolate that to NASA's amount they didn't 
review, it is maybe $20 million that is probably likely and 
appropriate on just a straight extrapolation that we are at 
risk of not getting if we don't do the review.
    Ms. Combs. We're certainly concerned about that, and that's 
the kind of thing that we look to GAO, to the IGs, to partners 
such as yourself, that when and if those kinds of programs are 
found, if there are any specific programs that people feel like 
we should dive into deeper and have more dialog with these 
departments and agencies than we're currently having. As you 
know, we've talked before with your staff. There are seven or 
eight programs that don't fall within the threshold of the law 
or with our 2\1/2\ percent in addition to that, that we monitor 
on a very careful and regular basis simply because we believe 
that there are specific situations out there that deserve and 
merit additional administrative oversight.
    And we are committed to doing that, and certainly, thanks 
to this committee, we've had other opportunities to include 
that in our future guidance that's coming out, and I think your 
folks have been looking at that already with us, but it was in 
direct relationship to conversations such as this that we've 
had, that we've been able to come up with additional and better 
guidance.
    Mr. Platts. I believe that has happened with NASA and with 
Gwen Sykes and her efforts of having all those Center CFOs and 
Center Directors working more hand-in-hand with headquarters, 
to have a more complete picture and understanding of their 
financial challenges and better management across the board. I 
think that is occurring, and sounds like with the recovery 
audits at NASA, one more step in the right direction, you are 
going to expand what they are actually reviewing.
    Ms. Combs. And there again, too, that is an example also of 
how an administrative management change in structure within the 
organization made a big difference in how they are able to hold 
people accountable, and bring the transparency needed to make 
those things happen.
    Mr. Platts. If we could give you the same authority over 
all the department agencies that you have to answer for here, 
as Gwen Sykes was able to finally get with the Center CFOs, 
that would help a lot for your ability to get them to do what 
you are after, right?
    Ms. Combs. Some people think my title, Controller--
[laughter.]
    Mr. Platts. With Director Bolten, who went over to the 
White House, you know, maybe OMB is going to have a stronger 
reach there.
    Ms. Combs. It helps to have friends everywhere.
    Mr. Platts. Mr. Williams, I wanted to get your thoughts, 
comments on specifically DHS and the fact that the auditor did 
find them in noncompliance, yet they report no risk, and then 
also on NASA, but especially on DHS, the noncompliance issue. 
Then the other half of the recovery audits is that DHS, 
although they report that they reviewed all of their amounts, 
the amount they report as reviewable was a small fraction of 
what they actually are contracting, so it seems like we are--
again, what we reviewed was good, but there is a whole bunch 
that we didn't review that probably should have been. If you 
can talk specifically on DHS on those two aspects, 
noncompliance with Improper Payments Information Act and the 
recovery audit aspect?
    Mr. Williams. Yes. As I was mentioning earlier, when you 
look at an organization that first of all had 10 material 
weaknesses and two reportable conditions, seven noncompliance 
issues including the Improper Payments Information Act, one of 
the things that we have talked about in all of my testimonies 
going back to before the act actually became law, we always 
focused on what was the root cause of improper payments, and it 
would always get back to the lack of internal controls or a 
breakdown in internal controls. So you have an environment in 
which there are numerous internal control weaknesses that have 
been identified by the auditor, and one issue, as far as 
compliance, in which based on their work, they basically 
concluded that the agency did not comply with the requirements 
of the act.
    Having said that, that could be several factors that the 
agency might have looked at and determined that it was in 
compliance. It could be, again, that we may get back to this 
issue of looking at the 2\1/2\ percent as far as how the 
programs were divided up, and you could have large numbers here 
in which you might need to do some of the things, as Dr. Combs 
mentioned earlier, in which there are some programs.
    I have done an analysis of the programs that reported in 
2005, and if it had not been for that additional requirement 
that OMB placed on the agencies, the numbered issue, instead of 
being about 38 billion, would have only been about 34 billion 
because if you take a look at one of my schedules in here, it 
basically lays out those agencies that even though they 
reported, they pointed out that they reported because OMB had 
mandated that they provide that information this year, and that 
if it had not been for that mandate, then they would not have 
been required to report.
    So you could have some of that going on at the agency also. 
I'm not for sure, but that is a possibility of a cause, but as 
I said, there's several agencies here, and the total come to 
about 4.3 billion that would drop that number down to about 34 
billion issues. DHS could have that situation, or it could be a 
situation in which the agency is just getting a handle on what 
needs to be done. I think the focus, as has been stated here 
earlier today, is pressure needs to be maintained on the agency 
to comply with the requirements of the act, and efforts need to 
be put out there so that everyone understands that this is 
important legislation, this is the American taxpayer dollars 
that we're talking about that's going out the door, and it is 
very important that we get a handle around this issues. And the 
sooner we get a handle around the issue, the better off we will 
be as far as that particular problem is concerned.
    So those are some of the things that I would say in that 
area, that there needs to be some dialog between, I would say, 
the agency, OMB, and as well as the Congress, because it's 
going to take pressure from, I think, all of those 
organizations in order to make sure that we have that comfort. 
Because I have not see anything, as I said earlier, I have not 
seen anything in the auditor's report, because Homeland 
Security is one of my agencies that I look at under the 
consolidated financial audit work that we do each year, and I 
have not seen anything that would give me any reason to doubt 
the conclusions that the auditors reached as far as the 
compliance issue is concerned here with Homeland Security.
    As far as the Recovery Act is concerned, I guess overall I 
concur with some of the statements that have been made today, 
that we are seeing progress here. I can recall last year when 
we talked about this particular component, and I think I made 
the statement that there had been about $60 million collected, 
and I think I was asked, ``do you mean 60 million or 6 
billion?'' And I said, ``No, it's only 60 million.'' So 
progress have been made, but again, there's a lot more that I 
think that can be done in this particular area.
    There are a lot of techniques, procedures that are out 
there that we call best practices. One of the things that I 
always like to highlight at these hearings is that we at GAO 
have put together a publication called Strategies for 
Addressing Improper Payments. It's got a lot of techniques in 
there. We always suggest that the agencies take a look at this. 
I know that CFO PCIE subgroups that's working on improper 
payments have mentioned it in some of their guidance. We 
encourage people to continue to look at that and try to make 
sure that they're following those best practices and trying to 
address this issue as far as recovering the money if it were 
possible.
    Mr. Platts. I agree, again, going from 60, and roughly 450 
or so million, heading in the right direction. The higher we 
get that number, the better in the sense that we are recovering 
more, but ultimately we want it to be lower because we are not 
making the improper payments to begin with. So that sort of 
goes to the whole internal control issue. I do want to touch on 
that with Dr. Combs.
    Before I do, Secretary, I have given you and Mr. Hill, a 
breather here while I was working with GAO and OMB.
    Mr. Hill. We're good with that. [Laughter.]
    Mr. Platts. I do want to touch one issue that the ranking 
member, he is going to markup, the gentleman from New York, Mr. 
Towns was hoping to get here, but they have a lot of votes in 
committee, so he has been detailed. But he did have one issue 
he wanted to be addressed specifically with you, with the 
claims processor or other contractors who are used by Medicare 
in the payment process. In what fashion are they specifically 
responsible for the accuracy of the payments that are passed 
through them, and should it be strengthened in their level of 
responsibility as a processor to verify the information?
    Mr. Hill. We absolutely think it should be, you know, 
accountability should go right down to the folks who are 
processing the claims. I think it's fairs to say that the 
Medicare Modernization Act has provided us a real robust set of 
tools to make sure that accountability is flowing through down 
to the FIs and the carriers, fiscal intermediaries and carriers 
we call them, who process the claims.
    Prior to the MMA, the contracts that we had with these 
entities were an anachronism of the enactment of the Medicare 
statute. They were very odd in the contracting world. We had 
very limited flexibility to actually hold those contractors 
accountable for how well they process claims or how well they 
did a lot of something. They were cost based, very difficult to 
get rid of the contractors.
    The MMA gave us the authority to contract with these 
entities just as any other contract, under FAR authority, where 
we can hold them accountable in any number of ways to 
accomplish the work for the Medicare beneficiaries that they 
do. And one of the ways that we are specifically going to hold 
them accountable is to incorporate in their performance metrics 
on a go-forward basis how well they do at reducing error rates.
    As Secretary Johnson said, beginning in 1996 we measured 
error rates at a national rate. Beginning in 2003 we were 
actually able to disaggregate that national rate to specific 
carriers and FIs. So now I can say for New York or for 
Pennsylvania or for Tennessee, what the carrier or the FI for 
that State, how well they do in processing those claims. It 
wasn't until, though, the MMA was passed and we had this new 
contracting authority that actually could say to a contractor, 
``Unless you get that rate down or do something to keep it 
stable, you know, we're going to take some action.'' Now we 
have the ability to either build in as part of a fee pool, use 
it as part of a competitive range determination on a go-forward 
basis to how well or who we are going to contract with, to say, 
``Look, if you're doing a good job, you're going to get a 
benefit for it. If you're not doing a good job, it's going to 
look negatively upon you as we continue to compete these 
contracts.''
    Mr. Platts. So you basically have built in, going forward, 
a financial incentive for them to be more dutiful in their 
reviewing of the claims.
    Mr. Hill. Absolutely.
    Mr. Platts. That is good to hear, and I am sure the ranking 
member will be glad to hear that. With extending that, that is 
in Medicare specifically. Again, with Medicaid, it is 
complicated, and you obviously don't have the same program. Is 
there something you are looking at, how to try to create that 
same incentive on the Medicaid side, and is the structure so 
different that it doesn't----
    Mr. Hill. Their relationship for us is with the States. 
It's not with the--the States have those relationships with 
contractors, and I think, you know, in some States where they 
have fiscal agents, they do use those sorts of incentives to 
keep----
    Mr. Platts. But it is really a State decision.
    Mr. Hill. But it's a State decision, and, you know, our 
incentives or disincentives would apply to States to keep their 
rates down. I think that becomes complicated on a whole bunch 
of different levels.
    Mr. Platts. Thank you.
    The GAO has been working with the State programs as far as 
a set of recommendations, and, Mr. Williams, if you wanted to 
kind of walk through your recommendations that you have 
supplied to OMB, and how to assist the State-Federal 
partnership programs to reduce improper payments. If you want 
to kind of give a capsule summary of those recommendations.
    And then Dr. Combs and Secretary Johnson, if there are 
specific, you know, your thoughts on the recommendations that 
have come forward and kind of where they stand, that would be 
great.
    Mr. Williams, you want to start?
    Mr. Williams. Yes, a quick synopsis. You basically asked us 
to take a look at what the States are doing in this particular 
area, given the fact that out of the $2 trillion budget, about 
$400 billion each year is going to the States to administer 
Federal programs. So we wanted to see what was happening on 
that side of the equation because there is some responsibility 
on the State parts also to make sure that the money is making 
it to the ultimate recipient.
    We interviewed various people. One of the things that we 
found in looking at this is that there were basically only two 
programs nationwide in which there was a statutory requirement 
that improper payment information be reported. One was the food 
stamp program. The other was the Department of Labor, the 
unemployment insurance program.
    We found that in the various States, the States were 
actually using some of the tools that we've talked about today, 
and doing risk assessment and other techniques in an effort to 
recover improper payments.
    Along the lines of what we're recommending is that we found 
that OMB had put together some guidance, and we had a couple of 
recommendations to OMB to clarify a couple of components of the 
recommendations. For example, the clearly define what stated 
minutes their programs represented, and a couple other areas 
that we talked about.
    In addition to that, we also had a recommendation that the 
Federal agencies work closely to communicate with the States 
and work with the States on how to go about doing the risk 
assessments and estimating improper payments.
    And, finally, we had a recommendation that focused on point 
that I had made earlier, and that is, OMB, Federal agencies and 
the States need to work together in every way possible, and get 
together to make sure that the lines of communications are open 
so that best practices are shared among organizations. So these 
are some things that we recommended that we think will improve 
the lines of communications and help the States become a 
stronger, larger partner in this effort of addressing the 
improper payments problem.
    Mr. Platts. And would an example of that be that best 
practices like the TANF pilot program and new hires match?
    Mr. Williams. That's correct.
    Mr. Platts. As we see that expand to 31 and eventually, 
hopefully, all 50, be the type thing you are looking for?
    Mr. Williams. Exactly. When you've got best practices like 
that, you want to expand it in every way possible until you've 
hit the entire universe.
    Mr. Platts. Dr. Combs.
    Ms. Combs. Yes. We have concurred with the GAO 
recommendations, each and every one of them, and thoroughly 
appreciated what information we were able to get from that. We 
also believe, yes, there was need for some clarity on some 
specific areas, and one of the best practices that we have not 
talked about here today was the State of Tennessee, in one of 
their highway project as well that was done. But again, as Mr. 
Williams just said, getting those best practices out there will 
encourage others to do the same.
    We are very committed to that. In fact, I personally met 
with some finance folks when they were in town for a 
conference, who are representatives in the States, their 
respective States, to hear from them and just hear if there are 
some things that we're not doing that we could do to reach out 
to them and to form better alliances and better relationships, 
and we intend to do quite a bit of followup with that, and 
having more frequent communications between our offices and 
them to help share those best practices.
    I think Secretary Johnson mentioned a marketing effort a 
while ago in his testimony, and that's a lot of what this 
sharing those best practices is all about. So we concur with 
the GAO recommendations.
    Mr. Platts. Secretary?
    Mr. Johnson. Two things come to mind. We have, for example, 
in TANF program, set up a Web site where States can enter their 
best practices and share, which would include these data 
matches. That's one thing that comes to mind.
    The other thing is this so-called A-133 single audit, where 
we ask that there be a single audit at States, and trying to 
expand the use of that a little bit, where we take specific 
programs and ask that in any given year that the auditors 
concentrate on that program to try to give us a better error 
rate and improper payment rate, through that means. So we've 
been experimenting with that with some States and finding some 
success. Now again, not everyone is going to do it and we're 
looking at ways to market that, if you will.
    Mr. Platts. I had the pleasure of speaking last year, and I 
forget the name of the group. I will say the American 
Association of Financial Managers--Association of Government 
Accountants. I was close--nor really. But I was there briefly, 
came in, got a chance to address and then had to come right 
back to D.C. But is there outreach at those settings? I kind of 
look at that as a continuing ed. opportunity where these best 
practices are shared, to encourage--because I know the brief 
time I was there I met a number of officials from Illinois, a 
number of States that were there at that national conference. 
Is there a sharing of this best--is that an example of the 
marketing that is done?
    Mr. Johnson. That would be a good example. We try a lot of 
areas to do that. NCSL, the Secretary has spoken there, every 
opportunity. But we can do a lot more. I mean we're just kind 
of just getting the vision of what you can do through those 
kind of organizations, so I really think there's a lot more to 
be done.
    Mr. Platts. I would think the environment is perfect. With 
the Deficit Reduction Act, a lot of what we did on the Medicaid 
side was actually--it was the National Government Association's 
recommendations, bipartisan, although you would never believe 
it by the criticism level at those of us who supported it, but 
it was using the knowledge of the State officials to say, here 
is the flexibility we need to ensure the integrity of the 
program so we can truly help those who need help, as opposed to 
those who want help but don't necessarily need it. So that 
sharing of information I think is so important.
    And having participated in NCSL, and ALEC myself in my 
State House days, I know that from a law-making perspective 
those are very helpful forums to learn what works already, 
rather than reinventing the wheel.
    Mr. Williams. Mr. Chairman, I would like to add, given that 
my boss is the former president of AGAA, he----
    Mr. Platts. Don't tell him I got the name from him. 
[Laughter.]
    Mr. Williams. I will not. The Association has put on 
workshops over the last year that focus specifically on 
improper payments issue, how to go about--in the Northern 
Virginia chapter, I should say, there's been presentations 
there, workshops on how to go about doing sampling and other 
procedures as far as addressing the Improper Payments Act.
    Mr. Platts. I am glad to hear it, because, again, all the 
various avenues when--hopefully the States won't need to be 
coerced but will see the numbers and the benefits of doing it.
    As you move forward with the marketing and the outreach, 
certainly if there are specific legislative hurdles that we 
needed to address, like MMA address with Medicare that we 
should be looking at, we welcome that feedback in these 
programs as you move forward, especially with the various HHS 
programs as you are moving forward with the plans, if there is 
additional authority, we are glad to hear, certainly in that 
case, energy and commerce with Medicaid, and we want to give 
you the tools to do what we are asking you to do.
    Ms. Combs. Mr. Chairman, before you leave that subject.
    Mr. Platts. Yes?
    Ms. Combs. I will say that the organization that you 
mentioned has been very effective in an outreach. They ask our 
office very frequently to serve on panels and to serve as 
keynote speakers, so it is an effective organization for 
getting our message out there. We have taken full advantage of 
that whenever we possibly can. People on my staff have served 
on panels. We've had people who have helped because their 
organization acts to work through specific programs with them, 
and that specifically was the group that was in town, and got 
some State people together. So those organizations are very, 
very helpful and effective, and I appreciate their partnership 
as well.
    Mr. Platts. Glad to hear it.
    I actually have one final question, Mr. Williams. I just 
wanted--if I made my notes right when we were talking about DOD 
with Mr. Duncan. Was I correct that you said of 38 programs at 
DOD, they said just three were susceptible?
    Mr. Williams. Of all of the programs at DOD, there were 
three programs that reported. That was up one from last year to 
the best of my memory. In 2004 there was Military Health and 
there was Military Benefits. In 2005, Military Pay was added. 
But, again, this is another program that if you look at the 
information that is reported in the PAR report, DOD makes a 
point of pointing out that these are programs that we are 
reporting because OMB has mandated that we report these numbers 
because they are former A-11 programs. But we do not believe 
that these programs have met the 2\1/2\ percent criteria, but 
we are reporting it because we have been mandated to do it by 
OMB. And those are the three programs that I believe we saw in 
the 2005 report, with no pay being added.
    Mr. Platts. Out of the entire department, right?
    Mr. Williams. Yes, this is department wide, as far as 
improper payment reporting.
    Mr. Platts. So in a department that is spending half a 
trillion dollars, they believe only three programs have 
susceptibility and they really don't believe that. They are 
only reporting it because----
    Mr. Williams. That's correct, because it's being mandated, 
exactly.
    Ms. Combs. Let me just also add that they also are 
reporting on their contract payments as well, and you got to 
remember, most of what they do there is contract payment, so 
they're reported on--they reviewed something like 223----
    Mr. Platts. Right, on their recovery audits. That is a good 
point. I stand----
    Ms. Combs. In all fairness.
    Mr. Platts [continuing]. Partially corrected.
    Ms. Combs. We'll give some credit when we can.
    Mr. Platts. So maybe in the 2005 year they were probably at 
about $450 billion, and to about half they actually did review 
through recovery audits, and--I mean their total budget about 
$450 billion, and they recovered $418 million.
    Mr. Williams. That is correct.
    Mr. Platts. So it is larger than----
    Mr. Williams. It's 473 is the amount that was identified 
for recovery, and about 148\1/2\ was actually recovered in 
2005.
    Mr. Platts. OK.
    Ms. Combs. I think the other point to make on this, that 
the outlays, they're tracking and reporting on about 71 percent 
of their outlays.
    Mr. Platts. Right. And so about 30 percent they are not 
reporting on currently, but they don't really believe that they 
have any program susceptible----
    Mr. Williams. Significant.
    Mr. Platts. Yes. Of significant improper payments.
    Mr. Williams. Yes. But this is an organization in which we 
have financial management at the Department on our high-risk 
series, and this is another agency at GAO that I have for 
responsibility for from the financial management arena. And we 
have, over the years, reported on various material weaknesses. 
Again, I get back to what I've testified is the root cause for 
improper payments in various areas.
    And I guess the final point that I would also like to add, 
while we do have these recovery audits, this is good to have in 
the overall scheme of things, but with the weaknesses in the 
agency's inability to have audited financial statements in 
their reportable conditions, I've always pointed out that in 
this particular exercise, you want to make sure that you have--
and I think it's been said earlier today--you want to make sure 
that you have those control techniques that prevent the horse 
from getting out of the barn in the first place, so to speak, 
and you want to make sure that you have a lot of those, given 
some of the departments that we've reported on in the past.
    Mr. Platts. A point well taken, and it goes to the 
Secretary's comment earlier that we want to get to where we are 
not worried about recovering, but just preventing. And that is 
an issue we talk about a lot, the internal control issue, and I 
know they will be reporting here in the next couple months, in 
June, I guess, with the requirements.
    Ms. Combs. On their internal controls.
    Mr. Platts. Right, on their internal controls, which 
hopefully they will translate to even more effectiveness on 
improper payments.
    Ms. Combs. Oh, absolutely. They are going to track hand-in-
hand.
    Mr. Platts. Great. Mr. Williams, you have DOD, you have 
DHS. Are you able to sleep at night? [Laughter.]
    You have to be worried about all those dollars, right?
    Mr. Williams. That's correct.
    Mr. Platts. I want to thank all four of our witnesses and 
your staffs for your assistance in preparing for the hearing, 
your written testimony, your testimony here today and your 
answers to the questions. I sincerely appreciate the importance 
of the partnership between OMB, the departments, GAO, Congress, 
all of us who are after the same thing, which is ensuring that 
we spend the taxpayer moneys wisely, efficiently and 
responsibly, and certainly that is what you and your staffs are 
dedicated to, and we appreciate those good faith efforts, and 
wish you success, especially at HHS. You have some huge 
challenges and especially in the State administered programs. 
We want to see you succeed, and any way that we can be of 
assistance as a committee, please let us know. But again, thank 
you.
    We will keep the hearing open for 10 days for any 
additional information that needs to be submitted. Otherwise, 
the hearing stands adjourned.
    [Whereupon, at 3:58 p.m., the subcommittee was adjourned.]

                                 
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