The basic or root causes of improper payments can typically be traced to a  lack of or breakdown in internal controls. A comparison of the fiscal years 2001 and 2000 improper payment  information reported in agency financial statements revealed several  significant differences in the programs reporting improper payments and  the amounts reported. They provide information on the purpose and effectiveness of  federal programs and on the resources spent in conducting them. We found that, although 10 of the 15 agencies discussed improper  payments in their fiscal year 2002 performance plans, none  comprehensively addressed improper payments for all four of the plan  elements required by GPRA. These responsibilities should include, but not be limited to   developing detailed action plans to determine the nature and extent of  possible improper payments for all agency programs and/or activities  spending federal funds;   identifying cost-effective control activities to address the identified risk   assigning responsibility for specific areas of improper payment-related  activities to appropriate program or activity officials;   establishing improper payment goals or targets and measuring  performance against those goals to determine progress made and areas  needing additional actions;    developing procedures for working with OMB and the Congress to  address barriers encountered that inhibit actions to reduce improper  payments; and   periodically reporting, through publicly available documents, to the  agency head, OMB, and the Congress on the progress made in achieving  improper payment reduction targets and future action plans for  controlling improper payments. Office of Management and Budget

We recommend that the Director of OMB take the following actions.
Why GAO Did This Study

This report discusses (1) the amount of improper payments reported in agencies' fiscal year 2000 financial statements, (2) the extent to which agencies' fiscal year 2002 performance plans address improper payments, (3) the extent to which the Office of Management and Budget (OMB) has implemented previous GAO recommendations in this area, and (4) other actions that might encourage agencies to better report improper payments. Of the 15 agency performance plans GAO reviewed, only 4 comprehensively addressed any of the Government Performance and Results Act requirements for evaluating the effectiveness of federal programs and the resources spent on them.

What GAO Found

GAO found that improper payments often result from a lack of, or breakdown in, internal controls. This report also contains recommendations for agencies to assign responsibilities to minimize improper payments and for OMB to assist agencies in identifying and implementing corrective actions.