Monday, June 10, 2013

Payment Recapture Audits - Progress So Far

In July 2010, the President signed the Improper Payments Elimination and Recovery Act (IPERA) which was intended to help achieve a reduction in wasteful, improper payments by $50 billion between then and 2012. According to a White House press release at the time, the federal government wastes billions of American taxpayers' dollars on improper payments to individuals, organizations, and contractors. These are payments made in the wrong amount, to the wrong person, or for the wrong reason.

There were a number of provisions to IPERA. The law requires agencies to conduct annual risk assessments, and if a program is found to be susceptible to significant improper payments, then agencies must measure improper payments in that program. It requires agencies to conduct payment recapture audits. As an incentive for agencies to get with the program , it authorizes agencies to use recovered funds for additional uses than currently allowed, including to improve their financial management.

In fiscal year 2011, the first year of IPERA implementation, DoD reported $1.1 billion in improper payments. GAO (Government Accountability Office) was asked to review the progress DoD has made to identify, estimate, and reduce improper payments. GAO's objective was to review the extent to which DoD has implemented key provisions of the Act.

GAO's report, issued last month, found that DoD did not adequately implement key provisions of the IPERA. It also found that the $1.1 billion reported savings was neither a reliable nor a statistically valid estimate because of long-standing and pervasive financial management weaknesses and significant deficiencies in the department's procedures to estimate improper payments. In fact, there is no way of knowing whether the estimate is realistic, overstated or understated.

DoD does not perform required risk assessments, have procedures to identify root causes of improper payments and develop corrective action plans, conduct recovery audits for any of its programs, or have procedures to ensure that its annual improper payment and recovery audit reporting is complete, accurate, and in compliance with IPERA.

GAO made about 10 recommendations and DoD more or less agreed with them. Contractors should be expecting increased oversight as a result of this program.

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