Legislative efforts have focused on improving the federal government’s  control environment. The Results Act is supported by the development of  federal cost accounting standards under the CFO Act, which require  agencies to identify the costs of government activities. Other federal expenditures are also likely  to increase. We also identified and reviewed recent GAO reports to  identify additional types of programs at risk. For the  nine agencies that reported improper payments in their financial statement  reports, we reviewed the agencies’ Results Act performance plans for fiscal  year 2000 to determine the extent to which the plans addressed improper  payments. However,  efforts by agencies to develop comprehensive estimates have varied. For example,  USDA disclosed improper payments of $1.4 billion for the Food Stamp  Program, but only acknowledged making improper payments without  providing a specific amount for its Federal Crop Insurance Corporation  (FCIC). Eleven of the CFO  Act agencies did not report any information related to improper payments  in their financial statement reports. Table 1 lists the nine agencies and the manner in which they reported  improper payments in their fiscal year 1998 financial statement reports for  the 17 programs identified. The extent of the problem for certain of these agencies’ programs is  unknown because agencies are not performing comprehensive quality  control reviews to estimate the range and/or identify rates of improper  payments. Although HCFA’s most recent estimate of improper  payments in its $177 billion Medicare Fee-for-Service program amounted to  $12.6 billion, this estimate did not consider improper payments made as  part of another $33 billion Medicare Managed Care program. Further,  nonexistent or ineffective internal controls, as previously discussed,  increase this risk. Annual estimates of improper payments in future audited  financial statements will provide information on the progress of these  initiatives. These agencies’ performance plans  included both performance goals and strategies for minimizing improper  payments for the Medicare Fee-for-Service, Old Age and Survivors  Insurance, Veterans Benefits, and Federal Employees’ Life Insurance  programs. Recommendations

To assist agencies in estimating and managing improper payments, we  recommend that the Director of the Office of Management and Budget,  through the Deputy Director for Management and OMB’s Office of Federal  Financial Management, within the framework of the CFO and Results Acts:
Develop and issue guidance to executive agencies to assist them in (1) developing and implementing a methodology for annually estimating  and reporting improper payments for major federal programs and (2) developing goals and strategies to address improper payments in  their annual performance plans. Require agencies to (1) include a description of steps being taken to  address improper payments in their strategic and annual performance  plans when the level of improper payments is mission critical and (2) consult with congressional oversight committees, as appropriate, on  the projected target levels and goals for estimating and reducing  improper payments, as presented in the agencies’ annual performance  plan. Supplemental Security Income: Long-Standing Problems Put Program at  Risk for Fraud, Waste and Abuse (GAO/T-HEHS-97-88, March 4, 1997). High-Risk Series (GAO/GGD-97-37R, February 1997).
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on improper payments in light of the projected future growth of federal expenditures, focusing on the: (1) amounts reported by agencies as improper payments in their fiscal year (FY) 1998 financial statements prepared pursuant to the Chief Financial Officers (FO) Act of 1990; (2) types of federal programs at risk of disbursing improper payments; (3) reported causes of improper payments across the federal government; and (4) extent to which agencies are addressing improper payments in their performance plans under the Government Performance and Results Act of 1993.

What GAO Found

GAO noted that: (1) in their FY 1998 financial reports, nine agencies collectively reported improper payment estimates of $19.1 billion; (2) these improper payment estimates relate to 17 major programs that expended approximately $870 billion; (3) the programs and related improper payment estimates include: (a) Medicare Fee-for-Service ($12.6 billion); (b) Supplemental Security Income ($1,648 million); (c) Food Stamps ($1,425 million); (d) Old Age and Survivors Insurance ($1,154 million); (e) disability insurance ($941 million); (f) housing subsidies ($857 million); and (g) veterans benefits, unemployment insurance, and others ($514 million); (4) also included are the Agency for International Development (AID), Medicaid, and the Federal Crop Insurance Corporation; (5) AID and the agencies administering these programs acknowledged making improper payments in their FY 1998 financial statement, but did not disclose specific dollar amounts; (6) improper payments are much greater than have been disclosed thus far in agency financial statements reports, as shown by GAO's prior audits and those of agency inspectors general; (7) agencies are not performing comprehensive quality control reviews--internal studies or reviews--for certain programs to determine the propriety of program expenditures; (8) as a result, the full extent of the problem--and possible solutions to it--is unknown; (9) comprehensive quality control reviews could also identify the causes of improper payments, which range from inadvertent errors to fraud and abuse; (10) working with the Office of Management and Budget (OMB), some agencies are taking steps to mitigate this risk by focusing attention on identifying, reporting, and reducing improper payments through the discipline of annual audited financial statements and the development of performance goals; (11) however, agencies responsible for 13 of the 17 programs having made improper payments--many of which GAO identified in its High-Risk and Performance and Accountability series issued earlier this year--did not include specific performance goals or strategies to comprehensively address these payments in their FY 2000 performance plans under the Results Act; and (12) as the federal budget grows, more taxpayer dollars are placed at risk, thus increasing the urgency for identifying and preventing these types of payments and providing complete accountability to taxpayers.