The act requires the head of each agency to annually review all programs  and activities that the agency administers and identify all such programs  and activities that may be susceptible to significant improper payments. The act further  requires that for any agency program or activity with estimated improper  payments exceeding $10 million, the head of the agency shall provide a  report on the actions the agency is taking to reduce those payments. If diligently and vigorously implemented, the Improper Payments Act  should have a significant impact on the governmentwide improper  payments problem. The level of importance each agency, the  administration, and the Congress place on the efforts to implement the act  will determine its overall effectiveness and the level to which agencies  reduce improper payments and ensure that federal funds are used for their  intended purposes. Further review of the table shows that the PARs contained improper  payment estimates for 31 of the 46 agency programs previously listed in  Circular A-11. The reports contained information on agency initiatives to  prevent or reduce improper payments for 22 programs and on impediments  to improper payment prevention or reduction for 11 programs. Figure 1 presents,  by agency program, the level of reporting that we found for the three  categories of information you asked about (improper payment amounts;  initiatives to prevent improper payments, reduce them, or both; and  impediments to preventing or reducing them). In some cases, agencies reported that they had  already determined that programs were not susceptible to significant  improper payments, despite the fact that the auditor’s reports in the same  PARs identified management challenges, or  material internal control  weaknesses within the programs where the design or operation of an  internal control procedure did not reduce, to a relatively low level, the risk  that errors, fraud, or noncompliance that would be material to the financial  statements may occur and not be detected promptly by employees in the  normal course of performing their duties. For 11 of the 46 programs for which agencies were required to report  improper payment information in their fiscal year 2003 PARs, four agencies  did not report estimated amounts, initiatives taken to reduce improper  payments, or impediments to preventing or reducing improper payments,  even though OMB Circular A-11, Section 57, originally required agencies to  report improper payment data, assessments, and action plans with their  initial budget submissions since July 2001. Top leadership  commitment and sustained attention to achieving results, both within the  agencies and at OMB, is essential to GPRA implementation. As I discussed  earlier in this testimony, the fiscal year 2003 PARs typically contained  limited amounts of improper payment information even for those programs  previously cited in Circular A-11 for which a reporting requirement has  existed since agency submissions of their fiscal year 2003 budgets to OMB. Conclusions

Since 1982, various legislative and administrative initiatives have focused  on and required agency assessments of internal controls over programs and  financial management activities. Although these initiatives may not  specifically target improper payments, by emphasizing internal controls,  they have recognized the important role that internal controls have in  ensuring that federal programs achieve their intended results and that  federal agencies operate them effectively and efficiently. Key to this effort is the need for a strong control  environment that creates a culture of accountability and establishes a  positive and supportive attitude toward reducing improper payments. Office of Personnel Management  35.
Why GAO Did This Study

The Improper Payments Information Act of 2002 requires that agencies annually review all their programs and activities and identify those that may be susceptible to significant improper payments. It further requires those agencies with improper payments exceeding $10 million to provide a report on the actions being taken to reduce those payments. This testimony updates agency progress in implementing the act based on our review of agency fiscal year 2003 Performance and Accountability Reports for the 15 agencies and 46 programs previously cited in Office of Management and Budget Circular A-11, Section 57. It required those agencies and programs to report improper payment information to the Office of Management and Budget beginning with their fiscal year 2003 budget proposals. The areas we addressed were (1) agencies that reported improper payments information and the programs and activities on which that information was based, (2) amounts of improper payments reported, (3) initiatives agencies reported taking to reduce those payments and the results of those initiatives, and (4) impediments to the prevention or reduction of improper payments reported.

What GAO Found

The fiscal year 2003 Performance and Accountability Reports (PAR) typically contained limited amounts of improper payment information even for those programs previously cited in Circular A-11 for which a reporting requirement has existed for at least three years. The PARs contained improper payment estimates for 31 of the 46 programs listed in Circular A-11. They contained information on agency initiatives to prevent or reduce improper payments for 22 programs and on impediments to improper payment prevention or reduction for 11 programs. Seven of 15 agencies reported on all three categories of information requested (improper payment amounts, initiatives taken to reduce or prevent improper payments, and impediments to improper payment prevention or reduction) for 9 of the 46 programs. For 11 of the 46 programs, the four agencies did not report on any of the three elements. In some cases, agencies reported that they had already determined that their programs were not susceptible to significant improper payments. However, the auditor's reports in the same PARs identified management challenges or material internal control weaknesses within the programs where the design or operation of internal control procedures did not reduce, to a relatively low level, the risk that errors, fraud, or noncompliance that would be material to the financial statements may occur and not be detected promptly by employees in the normal course of performing their duties. Key to the effort of reducing improper payments is the need for a strong control environment, including top leadership commitment and sustained attention to achieving results. Since 1982, various legislative and administrative initiatives have focused on and required agency assessments of internal controls over programs and financial management activities. Although these initiatives may not specifically target improper payments, by emphasizing internal controls, they have recognized the importance of internal controls--including a strong control environment--in ensuring that federal programs achieve their intended results and that federal agencies operate them effectively and efficiently. If diligently and vigorously implemented, the Improper Payments Information Act of 2002 should have a significant impact on the governmentwide improper payments problem. The level of importance each agency, the administration, and the Congress place on the efforts to implement the act will determine its overall effectiveness and the level to which agencies reduce improper payments and ensure that federal funds are used efficiently and for their intended purposes.