Thursday, May 11, 2017

Improper Payment Acts - Government Efforts to Reduce Improper Payments

The Improper Payments Information Act of 2002, the Improper Payments Elimination and Recovery Act of 2010, and the Improper Payments Elimination and Recovery Improvement Act of 2012 are collectively referred to as the Improper Payments Acts. The purpose of these Acts is to eliminate and recover payments improperly made by federal agencies. The Acts require federal agencies to review their programs and identify those that are susceptible to significant improper payments. Many Government contractors have felt the impact of these efforts, either through the respective finance (payment) offices, contract administration, and contract auditors. Improper payments can take many forms and do not necessarily mean that anything fraudulent, wasteful, or abusive has occurred. Sometimes timing issues result in temporary improper payments because, for example, contractors have not had time to update their billings to reflect final, rather than provisional, indirect expense rates.

In fiscal year 2015, the Federal Government estimated $136 billion in improper payments - payments that under statutory, contractual, administrative, or other legally applicable requirements should not have been made or were made in an incorrect amount. Such payments are generally believed to be widespread and a significant problem in the Federal Government.

The OMB (Office of Management and Budget) issued guidance on how Agencies should (or could) eliminate improper payments. First, agencies must conduct risk assessments to identify the programs most susceptible to significant improper payments. Then, agencies must come up with corrective action plans and estimate and report improper payments for those programs annually. Most importantly however, agencies must recover funds that were inappropriately expended.

So how are agencies doing in ferreting out and recovering improper payments?

A recent report by GSA's (General Service Administration) Office of Inspector General (OIG) gives us some insight on this issue. The report concluded that GSA's Office of Chief Financial Officer (the department tasked with ensuring compliance with the Improper Payment Acts) was deficient in its reporting and evaluation of improper payments. Specifically, the OIG found:

  • GSA did not have adequate internal controls over reporting improper payments. Its fiscal year 2016 report was published with numerous errors.
  • GSA was not successful in identifying ineffective controls through its continuous monitoring of vendor payments, and
  • GSA did not sufficiently implement corrective action related programs previously identified as high risk.

The GSA experience may or may not be indicative of the Government as a whole however GSA is one of the Government's biggest spenders of taxpayer funds. It is apparent that the emphasis on eliminating improper payments will continue. Contractors can continue to expect increased levels of oversight on public vouchers, progress payments, and other forms of payments from the Government.

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