Improper Payments: Posthearing Questions Related to Agencies
Meeting the Requirements of the Improper Payments Information Act
of 2002 (06-SEP-06, GAO-06-1067R).
On March 9, 2006, we testified1 before your subcommittee at a
hearing entitled, "Reporting Improper Payments: A Report Card on
Agencies' Progress." At the hearing, we discussed our findings on
federal agencies' challenges in meeting the requirements of the
Improper Payments Information Act (IPIA) of 2002 based on our
review of agencies' fiscal year 2005 performance and
accountability reports (PAR) and annual reports. We were asked to
provide answers to the following follow-up questions relating to
our March 9, 2006, testimony: (1) What concerns does GAO have
regarding not only DHS' inability to comply with the Improper
Payments Information Act; but on a greater scale with their
overall financial management? (2) About which Agencies that
reported in their fiscal year 2005 Performance and Accountability
Report that they had no programs susceptible to significant
improper payments does GAO have concerns about? (3) Should
"unavoidable overpayment" statistics at the Social Security
Administration be reported to the Office of Management and
Budget, and if so why would this be important, and how could the
Social Security Administration implement such a process? (4) What
concerns does GAO have with the Agency for International
Development's (USAID) reporting on improper payments? (5) Does
GAO have any concerns with the rest of these agencies and their
failure to report improper payment information? (6) has GAO done
any analysis of the President's proposals, and if so, what is the
GAO's assessment? (7) Has GAO made any recommendations regarding
the administration and financial controls in the EITC program?
(8) How can the Department of Labor's successes be carried over
to other agencies? and (9) Is GAO concerned that CDBG's outlays
are $5.4 billion, and not only are they not reporting, they have
claimed that they are in compliance?
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-1067R
ACCNO: A60336
TITLE: Improper Payments: Posthearing Questions Related to
Agencies Meeting the Requirements of the Improper Payments
Information Act of 2002
DATE: 09/06/2006
SUBJECT: Accountability
Accounting procedures
Budget obligations
Federal/state relations
Financial management
Financial management systems
Interagency relations
Overpayments
Program abuses
Reporting requirements
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GAO-06-1067R
* PDF6-Ordering Information.pdf
* Order by Mail or Phone
September 6, 2006
The Honorable Tom Coburn
Chairman, Subcommittee on Federal Financial Management, Government
Information, and International Security
Committee on Homeland Security and Governmental Affairs
United States Senate
Subject: Improper Payments: Posthearing Questions Related to Agencies
Meeting the Requirements of the Improper Payments Information Act of 2002
Dear Mr. Chairman:
On March 9, 2006, we testified1 before your subcommittee at a hearing
entitled, "Reporting Improper Payments: A Report Card on Agencies'
Progress." At the hearing, we discussed our findings on federal agencies'
challenges in meeting the requirements of the Improper Payments
Information Act (IPIA) of 2002 based on our review of agencies' fiscal
year 2005 performance and accountability reports (PAR) and annual reports.
Our review focused on the extent to which agencies have performed the
required assessments to identify programs and activities that were
susceptible to significant improper payments, the annual amount estimated
by the reporting agencies, and the amount of improper payments recouped
through recovery audits.
This letter responds to your June 15, 2006, request that we provide
answers to follow-up questions relating to our March 9, 2006, testimony.
Your questions, along with our responses, follow.
1. The Department of Homeland Security reported that it had
assessed all programs and activities and found none to be
susceptible to making significant improper payments. Their
independent auditor reported that the Department did not institute
a systematic method of reviewing all programs and identifying
those it believed were susceptible to significant improper
payments. This was the second year in a row that the auditor
reported IPIA noncompliance for DHS. What concerns does GAO have
regarding not only DHS' inability to comply with the Improper
Payments Information Act; but on a greater scale with their
overall financial management?
The Department of Homeland Security (DHS) continues to face
challenges in meeting the requirements of IPIA as well as
experience significant financial management weaknesses. For fiscal
year 2005, DHS received a disclaimer of opinion2 on its fiscal
year 2005 balance sheet and fiscal year 2004 consolidated
financial statements, primarily due to financial reporting
problems.3
As context, DHS's auditors cited 10 material internal control
weaknesses over areas such as financial management oversight;
financial systems security; property, plant, and equipment; and
accounts payable and disbursements. For example, agency auditors
reported that DHS had not established sufficient controls to
prevent duplicate payments to vendors related to prior year
obligations or adopted policies to ensure receipt of goods and
services prior to payment of invoices. In addition, DHS had not
provided effective management and oversight to ensure corrective
action plans were developed, implemented (with progress tracked),
and successfully completed to support the elimination of material
weaknesses and achieve consistent, timely, and reliable financial
reporting departmentwide. Furthermore, the auditors found seven
instances of noncompliance with applicable laws and regulations,
one of those being noncompliance with IPIA. Specifically, for a
second year in a row, its auditors found that DHS did not
institute a systematic method of reviewing all programs and
identifying those that are susceptible to significant erroneous
payments.4 The auditors also reported that DHS did not perform
test work to evaluate improper payments for all material programs
for fiscal year 2005. DHS's testing approach only included a
review of its programs with total disbursements exceeding $100
million for each agency component. DHS reported that programs with
fewer disbursements were assumed to be too small to exceed the
Office of Management and Budget's (OMB) reporting threshold of $10
million in improper payments.
DHS, like other federal agencies, has a stewardship obligation to
prevent fraud, waste, and abuse; to use tax dollars appropriately;
and to ensure financial accountability to the President, Congress,
and the American people. Management must establish effective
internal controls to safeguard assets, protect revenue, and make
authorized payments. Based on our previous work, the basic or root
causes of improper payments can typically be traced to a lack of
or breakdown in internal control. While DHS did not identify any
of its programs or activities susceptible to significant improper
payments, several of its inherited weaknesses clearly suggest risk
for improper payments. These inherited weaknesses included
financial accounting system design and operation limitations; lack
of adequate accounting systems and processes to ensure property,
plant, and equipment were properly recorded; and lack of policies
and procedures to monitor contractor costs and performance.
Our recent testimonies5 on select DHS programs further validate
our position. Specifically, from our review of DHS's Individuals
and Households program related to Hurricanes Katrina and Rita
disaster relief efforts, we estimated that between $600 million
and $1.4 billion in improper and potentially fraudulent individual
assistance payments had been made. Similarly, our recent testimony
on DHS's purchase card program identified a weak control
environment and ineffective internal control activities that
allowed potentially fraudulent, improper, and abusive or
questionable transactions to occur. DHS must continue to focus on
resolving weaknesses and developing strong internal controls to
overcome its financial management challenges.
2. The following agencies reported in their fiscal year 2005
Performance and Accountability Report that they had no programs
susceptible to significant improper payments:
o The Department of Commerce (Commerce)
o The General Services Administration (GSA)
o The Department of Homeland Security (DHS)
o The Department of the Interior (Interior)
o The Department of Justice (Justice)
o National Aeronautics and Space Administration
(NASA)
o The Nuclear Regulatory Commission (NRC)
o The Securities and Exchange Commission (SEC)
Please comment on any of the above agencies with which GAO has
concerns.
While we provided data on the above agencies' implementation
efforts to annually review all programs and activities as required
under IPIA, we have not analyzed their methodologies for
conducting risk assessments to identify those programs and
activities susceptible to significant improper payments. That
said, noncompliance issues related to IPIA and agencies' existing
financial management challenges raise questions regarding these
agencies' assertions that they had no programs susceptible to
significant improper payments. As we testified at the March 9
hearing, auditors for DHS and Justice cited agency noncompliance
with IPIA, primarily caused by inadequate risk assessments.
In addition, other agency auditors have reported major management
challenges that can hinder effective internal control. For
example, at Interior, its auditor reported major management
challenges in the agency's Workers Compensation Program.
Specifically, the auditors found that (1) Interior's inefficient
and ineffective management led to increases in the program's
annual costs; (2) the program was understaffed, employees lacked
training, and there was no uniform process for ensuring that costs
are accurate; and (3) there was an overwhelming lack of awareness
that workers' compensation fraud existed. The auditors also
reported that, at best, the program was managed inconsistently
and, at worst, was subject to abuse by managers seeking an easy
way to deal with problem employees.
Internal control serves as the first line of defense in
safeguarding assets and preventing and detecting errors, fraud,
waste, abuse, and mismanagement. Strong systems of internal
control provide reasonable assurance that programs are operating
as intended and are achieving expected outcomes. A lack of strong
internal control was evident in at least three of the eight
agencies listed above that reported no programs were susceptible
to significant improper payments. DHS, GSA, and NASA reported they
have no risk susceptible programs, yet each of these agencies
received a disclaimer of opinion on their fiscal year 2005
financial statement audits due to significant financial reporting
deficiencies. In addition, agency auditors identified a total of
47 reportable conditions6 related to internal control weaknesses
found during the eight agencies' financial statement audits.7
Weaknesses identified during a financial statement audit could
materially affect an agency's program operations and thus,
significantly increase the risk of making improper payments.
For example, at NRC, agency auditors identified four reportable
conditions during their examination of the effectiveness of NRC's
internal control over financial reporting. One of these reportable
conditions related to financial controls over disbursements.
Specifically, auditors found that NRC lacked verification controls
to review the propriety of edits made to vendor tables which house
information such as the vendor name, address, tax identification
number, and bank routing numbers. Verifying such edits helps to
ensure the existence of the vendor prior to payment, decreasing
the risk of improper payments to phantom vendors. The auditors
also reported that NRC does not have controls in place for review
and approval of high-value payments to nonfederal entities,
ranging from amounts in excess of $250,000 to $300,000. Payments
in the high-value category are not reviewed any differently than
payments with lower dollar values. During their internal control
testing, the auditors identified one improper payment in excess of
$1 million, which had not been detected by NRC. The auditors made
four recommendations to NRC to strengthen controls over its
disbursements. Going forward, agency management at this agency and
the other seven agencies listed above will need to ensure their
risk assessment methodologies measure the potential or actual
effect of major management challenges and internal control
weaknesses identified from financial statement audits in order to
assist in identifying programs and activities susceptible to
significant improper payments.
3. Should "unavoidable overpayment" statistics at the Social
Security Administration be reported to the Office of Management
and Budget? Why would this be important, and how could the Social
Security Administration implement such a process?
1GAO, Financial Management: Challenges Remain in Meeting Requirements of
the Improper Payments Information Act, GAO-06-482T (Washington, D.C.: Mar.
9, 2006).
2A disclaimer of opinion means that the auditor does not express an
opinion on the financial statements. This type of opinion is appropriate
when the audit scope is not sufficient to enable the auditor to express
such an opinion or when there are material uncertainties involving scope
limitations.
3DHS's auditors reported that they were engaged to audit the accompanying
consolidated balance sheets of DHS as of September 30, 2005 and 2004, and
the related consolidated statements of net cost, changes in net position,
and financing; combined statement of budgetary resources; and statement of
custodial activity for the year ended September 30, 2004. The auditors
were not engaged to audit the accompanying consolidated statements of net
cost, changes in net position, and financing; combined statement of
budgetary resources; and statement of custodial activity for the year
ended September 30, 2005.
4We consider the terms "erroneous payments" and "improper payments" to be
synonymous.
5GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
Between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.: June
14, 2006) and Purchase Cards: Control Weaknesses Leave DHS Highly
Vulnerable to Fraudulent, Improper, and Abusive Activity, GAO-06-957T
(Washington, D.C.: July 19, 2006).
6Reportable conditions are matters coming to an auditor's attention that,
in their judgment, should be communicated because they represent
significant deficiencies in the design or operation of internal control
that could adversely affect the federal government's ability to meet the
internal control objectives described in the audit report.
7The number of reportable conditions for each of the eight agencies ranged
from 2 to 14.
As we previously reported to your subcommittee,8 OMB has allowed the
Social Security Administration (SSA) to exclude from its estimate of
improper payments those payments that it had to make following
constitutional, statutory, or judicial requirements even though those
payments are subsequently determined to be incorrect.9 OMB deemed these
types of payments to be "unavoidable" improper payments,10 as there are no
administrative changes SSA could implement that would eliminate the
requirement to make such payments. Although the definition of improper
payments does not use the terms "avoidable"11 or "unavoidable," we agree
with OMB that a payment that was made because of a legal requirement to
make the payment, subject to subsequent determinations that the payment is
not due, should not be included in an agency's estimate of its improper
payments because it does not meet the definition of an improper payment
under the act.
Currently, SSA does not track or publicly report on these types of
payments. In addition, OMB has reported that it is not aware of other
agencies that are similarly legislatively mandated to make these types of
payments nor does OMB require governmentwide reporting of these types of
payments. Because agencies are not currently required to track, monitor,
and report these types of payments on a governmentwide basis, the
magnitude of this issue is unknown.
8GAO, Post-Hearing Questions Related to Agency Implementation of the
Improper Payments Information Act, GAO-05-1029R (Washington, D.C.: Sept.
16, 2005).
9IPIA defines an improper payment as a payment that should not have been
made or that was made in an incorrect amount (including overpayments and
underpayments) under statutory, contractual, administrative, or other
legally applicable requirements, and includes any payment to an ineligible
recipient, any payment for an ineligible service, any duplicate payment,
any payment for services not received, and any payment that does not
account for credit for applicable discounts.
10OMB defines "unavoidable" payments as payments resulting from legal or
policy requirements.
11OMB defines "avoidable" payments as payments that could be reduced
through changes in
administrative actions.
4. As you know, the Subcommittee is committed to rigorously
overseeing USAID and some of its programs. In a written question
to Linda Combs following last July's improper payments hearing, I
asked whether or not OMB supported USAID's internal assessment
that none of their programs were considered to be at risk for
"significant" improper payments. Her response deemed USAID's
documentation for fiscal year 2004 as acceptable, and stated their
intentions to re-evaluate their risk assessments in the fiscal
year 2005 Performance and Accountability Report to determine their
acceptability. According to GAO's report, USAID was silent as to
whether it had programs that are susceptible to making significant
improper payments.
a) What concerns does GAO have with the Agency for International
Development's (USAID) reporting on improper payments?
As with other agencies, it is important for USAID to fulfill the
requirements of IPIA and report the applicable improper payments
information in its PAR. As stated in IPIA and OMB's implementing
guidance, each agency shall annually review all programs and
activities that it administers and identify all such programs and
activities that may be susceptible to significant improper
payments. For fiscal year 2005, USAID reported limited improper
payment information in its PAR. From our review, we found no
assertions from USAID that it had assessed all programs and
activities for susceptibility to significant improper payments. A
risk assessment is a key step in gaining assurance that programs
are operating as intended and that they are achieving their
expected outcomes. It entails a comprehensive review and analysis
of program operations to determine where risks exist, what those
risks are, and the potential or actual effect of those risks on
program operations. The information developed during a risk
assessment forms the foundation or basis upon which management can
determine the nature and type of corrective actions needed. It
also gives management baseline information for measuring progress
in reducing improper payments. USAID only reported that it
continues to monitor all its programs and payment activities.
Because USAID's PAR lacks details about the monitoring activities
it reportedly performed, we are uncertain as to whether this meets
the above requirement to perform a risk assessment.
In fact, there were five programs that did not provide sufficient
reporting on improper payments in their fiscal year 2005
Performance and Accountability Report: USAID, the Export-Import
Bank, the Pension Benefit Guarantee Corporation, the Postal
Service, and the Smithsonian.
b) Does GAO have any concerns with the rest of these
agencies and their failure to report improper payment
information?
Any agencies' failure to report improper payment information as
required by the act is of great concern. For example, the Postal
Service's Office of Inspector General (OIG) reported that for
fiscal year 2005 it had identified $75 million in questioned
costs, $261 million in funds that could have been put to better
use, and $11 million in unrecoverable costs. The OIG further
reported fines, restitutions, and recoveries of $66 million. These
OIG findings suggest that the agency may not be adequately
assessing all of its programs and activities for significant
improper payments. In meeting the requirements of the act, the
Postal Service, as well as other agencies, should report on their
risk assessment activities and explicitly state whether the
results of the risk assessment identified programs and activities
susceptible to significant improper payments.
Since fiscal year 2000, our work has demonstrated that improper
payments are a long-standing, widespread, and significant problem
in the federal government. Transparency in reporting improper
payments is crucial at both the federal agency and governmentwide
levels. Public reporting helps establish accountability as well as
expectations for improvements. This includes holding agencies
accountable for achieving target rates or otherwise implementing
specifically planned actions. Annually identifying, estimating,
and publicly reporting progress made to reduce improper payments
enables agencies and others with oversight and monitoring
responsibilities to measure this progress and determine whether
further action is needed to minimize future improper payments.
5. As you know, the improper payments made in the Earned Income
Tax Credit makes up the second largest portion of government-wide
improper payments for fiscal year 2005, estimating $9.6 to $11.4
billion dollars paid improperly.
In fiscal year 2004 EITC had an improper payment rate of 25
percent. For fiscal year 2005, it was 28 percent and this is on
the low side, because it's just an estimate. This program does not
just need help, it needs a complete overhaul, with an improper
payment rate that high.
I am familiar with the legislative proposals in the President's
fiscal year 2007 Budget. OMB believes that if enacted, this
proposal would save $232 million in the first year and $5 billion
over ten years. That seems a bit under-ambitious when EITC is
making at least $10 billion in improper payments every year. In
other words, with improper payments of $100 billion over 10 years,
why are you [OMB] projecting only to reduce that number by 5
percent? Mr. Williams, has GAO done any analysis of the
President's proposals? If so, what is the GAO's assessment? Has
GAO made any recommendations regarding the administration and
financial controls in the EITC program?
To date, we have not performed an analysis or an assessment of the
President's legislative proposals as they relate to the Earned
Income Tax Credit (EITC) program. Regarding any recommendations
made, since fiscal year 2001, we have issued three reports that
included seven recommendations related to the administration and
financial controls in the EITC program. (See table 1.)
Table 1: GAO Recommendations since Fiscal Year 2001 Related to the
EITC Program
GAO recommendations
GAO report related to the EITC Status of
number GAO findings program recommendations
GAO-05-221a Of the 12 federal As participation The
means-tested programs rate estimates are recommendation is
reviewed, including the developed to use as open.
EITC program, we found program performance
that information on measures for the
participants' EITC program, we
eligibility and recommended that
particular recipient steps be taken to
groups can help program quantify errors that
managers more may result from
effectively address estimating EITC
issues related to participation rate
program access. With estimates to help
regard to the EITC users better
program, we found that understand the
the Internal Revenue accuracy of the data
Service (IRS) does not: and ensure that
(1) use rate estimates will be
information as a comparable over
performance measure or time.
(2) include rate
information in its
performance report or
other key program
reports.
GAO-05-92 b We found that IRS's We made four The first two
implementation of tests recommendations to recommendations
to address the leading (1) ensure the are closed. The
sources of EITC errors rationale for key remaining two
was not well documented decisions is recommendations
and the level and documented, (2) are open.
quality of some obtain information
services provided to on the quality and
test participants were use of all types of
not measured. taxpayer assistance,
(3) clearly state
limitations when
disseminating
results, and (4)
complete development
of detailed
evaluation plans for
the 2005 tests.
GAO-01-42c While IRS has made We made two The first
improvements since we recommendations to recommendation is
began auditing its (1) determine why closed. The
financial statements in service centers have second
fiscal year 1992, been ineffective in recommendation is
serious internal stopping refunds open.
control and financial associated with
and operational system questionable EITCs,
weaknesses continued to and (2) develop
affect the agency's reliable
ability to effectively cost/benefit data,
manage its operations using the best
and produce reliable available
financial statement information from the
information during screening and
fiscal year 1999. examination of EITC
claims, to estimate
the tax revenue
collected by, and
the amount of
improper refunds
returned to, IRS for
each dollar spent
pursuing these
outstanding amounts.
Source: GAO.
aGAO, Means-Tested Programs: Information on Program Access Can Be an
Important Management Tool, GAO-05-221 (Washington, D.C.: Mar. 11, 2005).
bGAO, Earned Income Tax Credit: Implementation of Three New Tests
Proceeded Smoothly, But Tests and Evaluation Plans Were Not Fully
Documented, GAO-05-92 (Washington, D.C.: Dec. 30, 2004).
cGAO, Internal Revenue Service: Recommendations to Improve Financial and
Operational Management, GAO-01-42 (Washington, D.C.: Nov. 17, 2000).
6. The Department of Labor has reduced improper payments in its
Unemployment Insurance program by about $600 million between 2004
and 2005. OMB reports that this is more than a 15 percent decrease
in the error rate for this program since last year's reporting. A
15 percent reduction is a significant accomplishment.
a) How can the Department of Labor's successes be carried over to
other agencies? b) If the Department of Labor has had this much
success in reporting and reducing improper payments, shouldn't
other federal-state partnered programs like Temporary Assistance
for Needy Families (TANF), Medicaid, Foster Care, Child Care,
State Children's Health Insurance Program (SCHIP), School Programs
and Women, Infants and Children (WIC) be able to coordinate
between the federal and state authorities to develop an improper
payment estimate?
In our April 2006 report,12 we highlighted that federal and state
coordination was needed to develop improper payment estimates for
federal programs administered at the state level, including some
of the programs included in your question. State-administered
programs and other nonfederal entities receive over $400 billion
annually in federal funds. Thus, federal agencies and states share
a responsibility for the prudent use of these funds. One of the
reasons the Department of Labor (Labor) has been able to report an
improper payment estimate for its Unemployment Insurance (UI)
program is because of a federal requirement13 in place that
mandates that Labor measure each state's payment accuracy rate. To
address this requirement, Labor implemented the Benefit Accuracy
Measurement (BAM) program, which is designed to determine the
accuracy of paid and denied claims in the UI program. It does this
by reconstructing the UI claims process from samples of weekly
payments and denied claims using data verified by trained
investigators. For claims that were overpaid, underpaid, or
improperly denied, the BAM program determines the cause of and the
party responsible for the error, the point in the UI claims
process at which the error was detected, and actions taken by the
agency and employers prior to the error. For erroneously paid
claims, the BAM program determines the amount of benefits the
claimants should have received, which becomes the basis for
subsequent recovery efforts. In addition to the federal
requirement14 in place that states must adhere to for estimating
improper payments, Labor has attributed its successes to the
support and commitment from top management to facilitate
successful implementation of IPIA and excellent working
relationships with the states.
There are several key initiatives that federal agencies with
state-administered programs should employ to fulfill the
requirements of IPIA, such as establishing a culture of
accountability, developing a system to collect program information
at the state level for estimating improper payments, and
monitoring program performance to determine if desired program
outcomes have been achieved. These key initiatives are aligned
with our Standards of Internal Control15 and executive guide16 on
strategies to manage improper payments. Among the standards that
are directly linked to the above key initiatives are the
following:
o Control environment-creating a culture of
accountability by establishing a positive and
supportive attitude toward improvement and the
achievement of established program outcomes.
o Information and communication-using and sharing
relevant, reliable, and timely financial and
nonfinancial information in managing activities
related to improper payments.
o Monitoring-tracking improvement initiatives over
time, and identifying additional actions needed to
further improve program efficiency and effectiveness.
As we previously reported,17 measuring improper
payments and designing and implementing actions to
reduce or eliminate them are not easy tasks,
particularly for grant programs that rely on
high-quality administration efforts at the state,
grantee, or subgrantee level. Given states'
involvement in determining eligibility and
distributing benefits, states are in a position to
assist federal agencies in reporting on IPIA
requirements. Communication, coordination, and
cooperation among federal agencies and the states
will be critical factors in estimating improper
payment rates and meeting IPIA reporting requirements
for state-administered programs.
7. There is some confusion on whether or not the Community
Development Block Grant Program (CDBG) is required to report
improper payments. It was one of the original programs on the
President's Management Agenda, so it's been required to report
since 2001. It is also required to report under the Improper
Payments Information Act, but is not reporting under [either]
requirements. In other hearings held by this Subcommittee as well
as in written responses to letters sent by me and Senator Carper,
the Department of Housing and Urban Development (HUD) has denied
that they are out of compliance with the Improper Payments
Information Act. The CDBG program is required to report under
IPIA. Is GAO concerned that CDBG's outlays are $5.4 billion, and
not only are they not reporting, they have claimed that they are
in compliance?
In its fiscal year 2005 PAR, HUD reported that based on completed
testing of fiscal year 2003 payments, the CDBG program was below
OMB's threshold for significant improper payments and, therefore,
was removed from HUD's at-risk inventory. As such, HUD stated that
this program was not subject to retesting unless there was a
significant change in the nature of activity or internal control
structure. We have several problems with HUD's position. First,
CDBG was
subject to the previous OMB Circular No. A-11 requirements18 and
thus was required by OMB's guidance to continue to report improper
payment information under IPIA, regardless of the
agency-determined risk level. Second, during a June 2006 hearing
before your subcommittee19 on the CDBG program, HUD's OIG reported
on numerous instances of fraudulent, improper, and abusive use of
program funds identified over a 2- 1/2 year period based on 35
audits. The HUD OIG reported that its office has recovered over
$120 million in program funds, identified over $100 million in
questioned costs, indicted 159 individuals, initiated
administrative actions against 143 individuals, and took 5 civil
actions and 39 personnel actions. As evident by the HUD OIG
reviews, the CDBG program may be at risk of making improper
payments.
12GAO, Improper Payments: Federal and State Coordination Needed to Report
National Improper Payment Estimates on Federal Programs, GAO-06-347
(Washington, D.C.: Apr. 14, 2006).
13Part 602 of Title 20, U.S. Code of Federal Regulations.
14We have previously reported that only the Food Stamps and Unemployment
Insurance programs had federal requirements for all states to annually
estimate improper payments. See GAO-06-347.
15GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
16GAO, Strategies to Manage Improper Payments: Learning From Public and
Private Sector Organizations, GAO-02-69G (Washington, D.C.: October 2001).
17GAO-05-1029R.
- - - - - -
We are sending a copy of this report to the Director of OMB and other
interested parties. This report is also available on GAO's home page at
http://www.gao.gov . Should you have any questions on matters discussed in
this report or need additional information, please contact me at (202)
512-9095 or at [email protected] . Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Major contributors to this report include Carla Lewis,
Assistant Director; James Maziasz, and Donell Ries.
Sincerely yours,
McCoy Williams
Director, Financial Management and Assurance
(195093)
18Prior to the governmentwide IPIA reporting requirements beginning with
fiscal year 2004, former section 57 of OMB Circular No. A-11, required
certain agencies to submit similar information, including estimated
improper payment target rates, target rates for future reductions in these
payments, the types and causes of these payments, and variances from
targets and goals established. In addition, these agencies were to provide
a description and assessment of the current methods for measuring the rate
of improper payments and the quality of data resulting from these methods.
19June 29, 2006 hearing before the Senate Subcommittee on Federal
Financial Management, Government Information, and International Security,
Committee on Homeland Security and Governmental Affairs.
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