# Presentation: 778711

## Eliminating Improper Payments

- Presented by**Matthew Faulkner & Aaron Prose**

## What is an Improper Payment?

- Means any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirement; and
- Includes any payment to an ineligible recipient, any payment for an ineligible service, and any payment that does not account for credit for applicable discounts.

- The Term Improper Payment:

- Office of the Chief Financial Officer

## What is Recovery Auditing?

- Duplicate Payments;
- Errors on Invoices or Financing Requests;
- Failures to Reduce Payments by Applicable Sales Discounts, Cash Discounts, Rebates or Other Allowances;
- Payments for Items Not Received;
- Mathematical or Other Errors in Determining Payment Amounts and Executing Payments; and
- Failures to Obtain Credit for Returned Merchandise.

- Recovery Auditing Identifies:

- Office of the Chief Financial Officer

## BackgroundLegislation and PMA Initiative

- Improper Payments Information Act
- Requires all programs perform an annual risk assessment for improper payments
- Programs determined to be at risk for improper payments are required to perform annual statistical samples and report results
- Section 831 of the Defense Authorization Act of 2002 Requires a Cost Effective Recovery Audit Program
- Eliminating Improper Payments Initiative - President’s Management Agenda.

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeUSDA IPIA Working Group

- OCFO Formed IPIA Working Group in 2003
- 290 Programs; with
- Almost 100 Billion in Annual Outlays
- Meets Quarterly, or More as Needed
- IPIA Progress/Results Reported on a Monthly Basis Through the USDA Eliminating Improper Payments Scorecard

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativePMA Scorecard Standards

- Yellow Standards
- Has a risk assessment in place that identifies all programs that are at significant risk of improper payments
- Has an OMB-approved plan for measuring improper payments on an annual basis and meets milestones established in the plan
- Agency has an OMB-approved corrective action plan that includes aggressive, yet feasible, reduction targets
- Agency complies with improper payments reporting requirements
- Green Standards
- Demonstrates that improper payments are being reduced consistent with reduction targets
- Has established improper payments recovery targets, where appropriate, and is actively meeting such targets

- Office of the Chief Financial Officer

## Eliminating Improper Payments Initiative PMA FY 2005 Scorecard Results

| OMB Scorecard | Current Status | Progress Rating |
| --- | --- | --- |
| FY 2005 Goal | GREEN | GREEN |
| FY 2005 1st Quarter Scorecard | RED | N/A |
| FY 2005 2nd Quarter Scorecard | RED | GREEN |

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeUSDA Required Annual Actions

- Conduct Risk Assessments on All Programs for Improper Payments
- Conduct Statistical Sample on All High Risk Programs
- Establish & Implement Cost Effective Recovery Audit Program for Fund Disbursements and Contract Compliance

- Office of the Chief Financial Officer

## FY 2005 Management Challenge

- OIG Audited USDA’s FY 2004 Improper Payments Activities
- Audit Identified Several Findings and Recommendations
- Added Improper Payments to the Department-wide List of Management Challenges

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeFY 2005 Risk Assessment Changes

- OCFO Revised Risk Assessment Guidance and Templates
- FY 2004 templates listed general risks and internal controls
- FY 2005 templates are structured to require program specific vulnerabilities and internal controls
- Programs are divided into groups based on size.  The larger the program the more in depth the risk assessment
- OCFO Increased Review of Draft Risk Assessments
- All risk assessments are reviewed by OCFO
- Larger risk assessments were performed in sections with OCFO review after each section
- Added a New “Tests of Transactions” Requirement

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeRisk Assessment Challenges

- FY 2005 Challenges:
- Complete and review all risk assessments by 4/30/05
- Perform “Tests of Transactions” for the first time
- FY 2006 Challenges:
- Review programs that will need substantial risk assessment work
- Some programs will need full risk assessments
- Some programs will need specific improvements to sections
- Some programs will be left substantially unchanged from FY 2005
- Improve “Tests of Transactions”
- Improve how audits are addressed in risk assessments
- Address both program and financial risks
- Accelerate timeline

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeAnnual Statistical Sample

- FY 2005 Challenges
- Perform statistical samples on five programs
- Develop corrective action plans for nine programs
- Develop and meet improvement targets for FY 2005
- Develop improvement targets for FY 2006-2008
- Set targets to recover improper payments
- Achieve green status on Eliminating Improper Payments PMA
- FY 2006 Challenges
- Meet improvement targets
- Implement the corrective action plans
- Work towards completing a statistical sample on remaining four programs
- Move the statistical sample and reporting process into normal routines

- Office of the Chief Financial Officer

## Eliminating Improper Payments InitiativeRecovery Audit Challenges

- FY 2005 Challenges
- Forest Service and DA are implementing a pilot program with PRG Schultz to perform recovery auditing.
- Based on results that will be available in June 2005, OCFO will determine whether to expand the program to the entire Department.
- Develop a departmental program
- FY 2006 Challenges
- Establish standardized, routine process for recovery auditing
- Maximize recoveries while minimizing costs

- Office of the Chief Financial Officer

## Contact Information

- Matthew Faulkner
- Email: _[matthew.faulkner@usda.gov](mailto:matthew.faulkner@usda.gov)_
- Phone: (202) 720-1307
- Aaron Prose
- Email: _[aaron.prose@usda.gov](mailto:aaron.prose@usda.gov)_
- Phone: (202) 720-1558

- Office of the Chief Financial Officer

## Questions?