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Summary

On November 26, 2002, the Improper Payments Information Act (IPIA) was signed into law as P.L. 107-300 (116 Stat. 2350). Augmenting previous financial management reform laws, the IPIA seeks to increase financial accountability in the federal government, and thus reduce wasteful spending. The law requires agencies to identify each year programs and activities vulnerable to significant improper payments, to estimate the amount of overpayments or underpayments, and to report to Congress on steps being taken to reduce such payments. In May 2003, the Office of Management and Budget (OMB) issued guidance to agencies on the implementation of the IPIA, which was revised and incorporated into OMB Circular A-123 as Appendix C in August 2006. OMB™s guidance, while consistent with some provisions of the IPIA, has been criticized on several counts. Whereas the statute requires agencies to report to Congress on all programs with more than $10 million in estimated improper payments, OMB added an additional threshold, such that agencies must only report on programs with improper payments that exceed both $10 million and 2.5% of total program payments. Critics have identified a number of examples of programs with improper payments over $10 million that are not reported to Congress because they do not also meet the 2.5% threshold. In the 2006 update of its guidance, OMB stated that it may determine on a case-by-case basis that some programs are to be subject to annual Performance and Accountability Report requirements, even if they do not meet the 2.5% threshold. OMB™s guidance has also been criticized for permitting agencies to exempt some programs from the IPIA™s annual requirement for risk assessment. Under the act, every program and activity is to be reviewed each year. OMB™s guidance, however, now allows agencies to review a program once every three years if it has been deemed low-risk. Critics say this runs counter to the language and intent of the IPIA, and that it leaves open the possibility that improper payments might go undetected during the exemption period. For FY2008, OMB reported a government-wide error rate of 3.9%. This figure does not cover an estimated 3.0% of at-risk outlaysŠabout $61 billionŠwhich lack improper payment estimates and are not yet reflected in the error rate, including Medicare Prescription Drug Benefit outlays. Until valid estimates become available for all risk-susceptible programs, the full extent of the improper payments problem will remain unknown. In the 111th Congress, the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security held a hearing on fiEliminating Waste and Fraud in Medicare and Medicaidfl on April 22, 2009. In FY2008 these two programs accounted for nearly half of all reported improper payments. The House Subcommittee on Government Management, Organization, and Procurement held a hearing on fiOversight of Federal Managementfl on July 8, 2009. On July 23, 2009, Senator Carper, along with four cosponsors, introduced S. 1508, the Improper Payments Elimination and Recovery Act of 2009, similar to S. 2583 as reported in the 110th Congress. On July 29, the bill, as amended, was ordered reported favorably by the full committee. A companion measure, H.R. 3393, was introduced and referred to the House Committee on Oversight and Government Reform. This report will be updated as developments warrant.

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