prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The United States has many international agreements that require treaty partners to provide certain information to IRS, which can help prevent the use of foreign bank accounts to facilitate tax evasion  FATCA goes much further, requiring FFIs to report more detailed information to IRS about their U S  customers annually  These provisions are important developments in efforts to combat tax evasion by U S  persons holding investments in offshore accounts  FATCA generally requires certain taxpayers to report foreign financial accounts and other specified foreign financial assets whose aggregate value exceeds specified thresholds to IRS on Form 8938  These taxpayers must report these assets and income generated from such assets to IRS with their tax return on Form 8938  These thresholds vary by filing status—such as single or married filing jointly—and by domestic or foreign residency  FATCA also promotes third-party reporting of foreign financial assets by requiring a withholding agent to withhold 30 percent on certain payments to an FFI unless the FFI or the jurisdiction in which the FFI is located has entered into an agreement with the United States to report certain account information of their U S  customers  Under such an agreement, participating FFIs report detailed information to IRS annually about accounts held by their U S  customers using an IRS Form 8966, FATCA Report (Form 8966)  According to IRS, FATCA improves visibility into taxable income from foreign sources, and enhances the agency’s ability to identify and pursue taxpayer noncompliance  For example, FATCA allows IRS to compare information reported by FFIs on Forms 8966 to information reported by U S  persons on Forms 8938  According to IRS, this comparison can be used to ensure taxpayers and FFIs are properly reporting foreign financial assets and income from international investments  This type of comparison is a common IRS enforcement technique  For example, IRS can directly compare information it receives from financial institutions’ IRS Form 1099-INT, Interest Income, against a tax return to determine if the taxpayer reported income generated from interest earned  To facilitate FATCA implementation for FFIs operating in jurisdictions with laws that would prohibit FFIs from complying with the terms of the FFI agreement, Treasury developed two alternative intergovernmental agreements (IGA)—Model 1 and Model 2—to facilitate the effective and efficient implementation of FATCA by removing partner jurisdictions’ legal impediments to comply with FATCA reporting requirements, and reducing burdens on FFIs located in partner jurisdictions  FFIs from countries with Model 1 IGAs report information on U S  persons’ accounts to their respective host country tax authorities (HCTAs)  The HCTAs, in turn, compile the information from FFIs and transmit it to IRS  In contrast, FFIs from countries with Model 2 IGAs, or countries treated as not having an IGA in effect, directly report information on U S  persons’ accounts to IRS  Separate from the FATCA requirements, regulations implementing the Bank Secrecy Act of 1970 (BSA) also impose a separate self-reporting requirement for foreign accounts  Specifically, certain taxpayers and residents are required to file an FBAR with FinCEN annually if they have financial interest or signature or other authority over one or more foreign financial accounts with a total of more than $10,000, regardless of whether they reside within or outside the United States  Federal, state, and local law enforcement agencies can use information from these reports to combat financial crimes, including terrorist financing and tax evasion  Appendix IV provides a comparison of Form 8938 and FBAR reporting requirements  Figure 1 depicts the flow of foreign financial account information from U S  persons and FFIs to IRS and FinCEN through the FATCA and FBAR reporting processes  As part of the FATCA reporting requirements, IRS collects information on financial accounts through forms and reports submitted by both taxpayers and FFIs  As part of this effort, IRS requires taxpayers to identify their TINs on Forms 8938 they submit  IRS also requires participating FFIs to report the TINs of each account holder who is a specified U S  person on Forms 8966  IRS intends to use reported TINs to link Form 8938 data filed by taxpayers to Form 8966 data filed by the FFIs to ensure that taxpayers and FFIs are properly reporting foreign financial assets  However, IRS often could not link account information collected from FFIs to the account’s owner because of incorrect or missing TINs  In July 2018, the Treasury Inspector General for Tax Administration (TIGTA) found that almost half of new Forms 8966 filed by FFIs did not include a TIN or included an invalid TIN  A consulting firm working with FFIs to implement FATCA reporting requirements told us that FFIs encountered significant challenges obtaining accurate TINs from U S  persons as part of the self-certification process  For instance, FFIs encountered situations where U S  persons provided incomplete or inaccurate TINs—such as Social Security Numbers (SSN) with less than nine digits—on forms used to self-certify their status as U S  persons  FFIs also encountered situations where U S  persons may not have obtained TINs or were unwilling to provide them to FFIs  Additionally, banking associations told us that it has taken time, effort, and expense for FFIs to report TINs, as they had to upgrade computer systems to collect and record TINs from U S  customers  Finally, Treasury told us that jurisdictions that have an IGA with the United States but no legal requirement to collect TINs are not in compliance with the requirements of the IGA  Treasury and IRS determined that some FFIs reporting from countries with Model 1 IGAs needed additional time to implement procedures to obtain and report required U S  TINs for preexisting accounts that are U S  reportable accounts  Consequently, IRS provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs under Model 1 IGAs  Specifically, in September 2017, IRS issued a notice modifying procedures for FFIs reporting from countries with Model 1 IGAs to become compliant with TIN reporting requirements for preexisting accounts  For calendar years 2017-2019, IRS will not determine that certain FFIs in countries with Model 1 IGAs are significantly noncompliant with their obligations under the IGA solely as a result of a failure to report U S  TINs associated with the FFI’s U S  reportable accounts, providing they (1) obtain and report the date of birth of each account holder and controlling person whose TIN is not reported, (2) make annual requests for missing TINs from each account holder, and (3) search electronically searchable data maintained by such FFIs for missing required U S  TINs before reporting information that relates to calendar year 2017 to a partner jurisdiction  As a result, even without any further extensions, calendar year 2020 is the earliest IRS will be enforcing requirements for FFIs from countries with Model 1 IGAs to provide accurate and complete information on U S  account holders’ TINs to IRS  Without valid TINs on Forms 8966 submitted by FFIs, according to IRS officials, IRS faces significant hurdles in matching accounts reported by FFIs to those reported by individual tax filers on their Forms 8938  As a result, IRS must rely on information such as names, dates of birth, and addresses that the filers and/or FFIs may not consistently report  Without data that can be reliably matched between Forms 8938 and 8966, IRS’s ability to identify taxpayers not reporting accurate or complete information on specified foreign financial assets is hindered, interfering with its ability to enforce compliance with FATCA reporting requirements, and ensure taxpayers are paying taxes on income generated from such assets  In July 2018, TIGTA reported that IRS lacked success in matching FFI and individual taxpayer data because reports FFIs filed did not include or included invalid TINs  This, in turn, affected IRS’s ability to identify and enforce requirements for individual taxpayers  TIGTA recommended, among other things, that IRS initiate compliance efforts to address and correct missing or invalid TINs on Form 8966 filings from FFIs from countries with Model 2 IGAs or without any IGAs with the United States  IRS management said it disagreed with this recommendation because a system to ensure validation of every TIN upon submission of a Form 8966 would be cost prohibitive  However, IRS management said that IRS would address invalid TINs as they are uncovered on other compliance efforts, such as initiating development of a data product to automate risk assessments across the FATCA filing population  IRS also said it continues efforts to systematically match Form 8966 and Form 8938 data to identify nonfilers and underreporting related to U S  holders of foreign accounts  However, IRS management told us they are waiting until they have a full set of data, including TINs, before doing analysis to develop a compliance strategy  According to TIGTA, IRS management believed that having the FFI’s Global Intermediary Identification Number (GIIN) on Form 8938, which is filed by the taxpayer, would help with matching records  However, Form 8938 instructions identify that the field is optional for taxpayers to complete  TIGTA recommended that to reduce taxpayer burden in obtaining GIINs from FFIs, IRS add guidance to Form 8938 instructions to inform taxpayers on how to use the FFI List Search and Download Tool on the IRS’s website to obtain an FFI’s GIIN  IRS agreed with this recommendation  However, even if an individual taxpayer provided GIINs, IRS may continue to have difficulty matching accounts with U S  taxpayers if the TIN and name of the account holder reported on the Form 8966 do not match the TIN and name of the taxpayer on the Form 8938  IRS officials said they are aware of these difficulties and have attempted to match Forms 8938 and 8966 based on other criteria such as dates of birth  In its response to our draft report, IRS said that all financial institutions and foreign tax authorities that file required account information receive a notification listing administrative and other minor errors contained in their reporting  According to IRS, its Large Business and International division follows up with foreign tax authorities regarding these errors to ensure the tax authorities are working with financial institutions to correct these errors in compliance with the countries’ IGAs  IRS added it has initiated a campaign addressing FFIs that do not meet their compliance responsibilities with respect to account opening requirements  Additionally, IRS drafted a risk acceptance form and tool addressing risks in implementing FATCA compliance and business process capabilities  This risk assessment focused on the limitations IRS faces due to budget constraints, but did not address the specific risks it faces from not receiving complete and valid TINs on U S  account holders  We previously reported that risk management could help stakeholders make decisions about assessing risk, allocating resources, and taking actions under conditions of uncertainty  Key management practices for risk management we identified from our prior work include identifying, analyzing, and prioritizing risks; developing a mitigation plan to address identified risks; implementing the plan; and monitoring, reporting, and controlling risks  Without developing a risk mitigation plan to address risks IRS faces from not receiving complete and valid TINs moving forward, IRS may lose opportunities to adjust its compliance programs to better identify U S  persons who are not fully reporting specified foreign financial assets as required under FATCA  Several IRS databases store data collected from individuals’ electronic and paper filings of Form 8938 and/or elements of parent individual tax returns to which the Form 8938 is attached—the filer’s country of residence and filing status—used to determine specified reporting thresholds for Form 8938 filers  Additionally, data from these databases and other sources are transferred downstream to IRS’s Compliance Data Warehouse (CDW)—a database used for research and analytical purposes  We extracted data from copies of Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) data copied into CDW to obtain information reported on Forms 8938 and relevant information from parent tax returns, such as filing status and filers’ country of residence  We found that IRTF and MTRDB had inconsistent and incomplete data  For example, neither database had consistent and complete information on foreign financial account and other asset information submitted by Form 8938 filers  While IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted on Forms 8938  Additionally, IRS officials said MTRDB is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns  Officials from IRS’s Research, Applied Analytics and Statistics (RAAS) division also noted that CDW did not have reliable information from Form 8938 paper filings  Because of the lack of foreign financial asset information from such filings, we could not report complete information on assets reported by Form 8938 filers  Further, IRS does not provide instructions to CDW users on how to extract appropriate data from CDW—such as data copied from IRTF and MTRDB—leading to confusion on which databases to use for extracting Form 8938 and relevant parent tax return data  For example, five distinct tables within CDW are required to identify the TIN, parent form, filing status, country of residence, and amount of foreign assets accurately  Without clear explanations of how data in each of these tables relate to each other and to the underlying filings, errors could be introduced into CDW users’ analyses of foreign asset information  Standards for Internal Control in the Federal Government notes that management should use quality information to achieve the entity’s objectives  One attribute of this principle includes processing data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis  Additionally, the Internal Revenue Manual states that IRS needs to measure taxpayer compliance so that customer-focused programs and services can be enhanced or developed so that compliance information and tools can be improved  According to IRS officials, IRS researchers have been taking additional steps to obtain and review Form 8938 and parent tax return data stored in the Integrated Production Model (IPM) database  They said IPM is the only database that contains complete data from individuals’ electronic and paper filings of Forms 8938 and relevant elements of parent tax returns  IRS officials said that RAAS has been working with IRS’s information technology (IT) division to obtain read-only access to IPM, and import Forms 8938 and 8966 data from IPM into CDW for analysis  However, as of February 2019, this effort has been delayed due to budget constraints  In its response to our draft report, IRS said that obtaining read-only access would require a new technical process and plans to continue working with IT on the feasibility and timeframe for enabling this access  Enabling access to consistent and complete Form 8938 and parent tax return data for compliance staff and researchers from RAAS and other IRS business units would help IRS strengthen its efforts to enforce compliance with FATCA reporting requirements and conduct research to bolster enforcement efforts  However, such efforts may be hampered until IRS can ensure readily available access to such data  We previously recommended that IRS develop a broad strategy, including a timeline and performance measures, for how IRS intends to use FATCA information to improve tax compliance  IRS agreed with this recommendation and developed a strategy for FATCA in July 2013  IRS updated the strategy in 2016 by creating the FATCA Compliance Roadmap as a comprehensive plan to articulate IRS’s priorities to facilitate compliance with FATCA reporting requirements  The roadmap also provided an overview of compliance activities used solely for enforcing FATCA reporting requirements or enhancing existing compliance efforts  However, in July 2018, TIGTA reported that IRS had not updated the FATCA Compliance Roadmap since 2016, and had taken limited or no action on a majority of the planned activities outlined in it  We also found that IRS had not yet evaluated the effects of FATCA, including the effects on voluntary tax compliance  IRS documentation states that only 7 of 31 capabilities outlined in the FATCA Compliance Roadmap were delivered due to funding constraints  As of October 2018, IRS has stopped using the FATCA Compliance Roadmap and has not developed a revised comprehensive plan to manage efforts to leverage FATCA data to improve taxpayer compliance  According to IRS officials, IRS moved away from updating broad strategy documents, such as the FATCA Compliance Roadmap, to focus on individual compliance campaigns  These include a campaign to match individual tax filers to the reports from FFIs, and another campaign to identify FFIs with FATCA reporting requirements who are not meeting all of their obligations  According to what IRS told us, with the passage of time and as FATCA is becoming more integrated into agency operations, it has moved from updating the broad strategy documents focused on FATCA to working on compliance campaigns that incorporate FATCA into overall tax administration  Additionally, IRS and outside researchers plan to study the role of enforcement in driving overall patterns in reporting offshore assets and income generated from such assets  Though IRS maintains that FATCA is more integrated into its operations, TIGTA’s 2018 report concluded that IRS was still unprepared to enforce compliance with FATCA in part because it took limited or no action on the majority of planned activities outlined in the FATCA Compliance Roadmap  Documenting a framework for using FATCA reporting requirements to improve taxpayer compliance and measure their effect is consistent with three steps we found leading public sector organizations take to increase the accountability of their initiatives: (1) define clear missions and desired outcomes; (2) measure performance to gauge progress; and (3) use performance information as a basis for decision-making  We also previously reported that it is important for IRS to use a documented framework that defines a clear strategy, timeline, and plans for assessment  Having such a framework in place can help IRS better allocate resources and avoid unnecessary costs resulting from not having the necessary or appropriate data available to execute its objectives  In light of the challenges IRS faces to collect, manage, and use FATCA data to improve compliance in a resource-constrained environment, employing a comprehensive plan would help IRS maximize the use of collected data and better leverage individual campaigns to increase taxpayer compliance  Without such a plan, IRS’s ability to collect and leverage data collected under FATCA for compliance enforcement and other purposes is constrained  We could not report on total values of foreign financial assets on Forms 8938 in tax years 2015 and 2016  However, we could provide a range of total maximum account values reported on FBARs during the same period  Specifically, we determined that more than 900,000 individuals filed FBARs in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1 5 trillion to more than $2 trillion each year  A little more than one in five—or about 21 7 percent—of the approximately 404,800 Forms 8938 filed with IRS in tax year 2016 were done so from U S  persons living abroad, with the other 78 3 percent living in the United States  Table 1 shows that a higher proportion of Form 8938 filings from U S  persons living abroad for tax year 2016 were filed on paper (43 3 percent) than Form 8938 filings from U S  persons living in the United States during the same period (14 7 percent)  We extracted these data from IRTF, which IRS officials said is the authoritative source for filers of Form 8938  However, we could not report complete information on foreign financial assets reported by Form 8938 filers because such data are incomplete; as noted above, IRS databases we used to extract Form 8938 data—IRTF and MTRDB—do not include asset information reported on paper filings of Forms 8938  Of the approximately 404,800 Forms 8938 filed by individuals for tax year 2016—the most recent data available—we could access information on residency of filers and reported foreign financial assets from about 277,600 Forms 8938 that did not indicate that foreign financial assets and values were declared on other forms besides the Form 8938  Of the subset of these Forms 8938, more than one quarter—or about 73,500— reported foreign financial assets in amounts that indicate the Form 8938 may have been filed unnecessarily, since they reported specified foreign financial assets with aggregate values at or below reporting thresholds as of the last day of the tax year  Based on available Form 8938 data from tax year 2016, table 2 shows that about 61,900 filings from U S  persons living in the United States and about 11,600 filings from U S  persons living abroad during the same tax year reported specified foreign financial assets with aggregate values at or below end of tax year thresholds  These totals likely understate the total number of Forms 8938 that U S  persons may have filed unnecessarily in tax year 2016; due to data limitations, these totals exclude Forms 8938 without asset information stored in IRS’s databases, including most Forms 8938 filed on paper and Forms 8938 where filers identified that they declared foreign financial assets on other forms besides the Form 8938  There is no clear explanation as to why some U S  persons may have filed Forms 8938 unnecessarily  However, we identified a number of potential reasons from focus groups and other interviews with stakeholder groups  In focus groups we conducted, participants expressed confusion about IRS’s instructions for completing the Form 8938 and information provided on IRS’s website  In the instructions for completing Form 8938, IRS described the specific types of foreign financial assets that are to be reported on Form 8938, and the asset value thresholds that must be met for required reporting, depending on the location of residence and filing status of the taxpayer  IRS also posted responses to frequently asked questions on meeting FATCA reporting requirements on its website, and established a separate page on its website comparing foreign financial assets that must be reported on Form 8938 and/or FBAR  Nonetheless, focus group participants reported confusion on whether and how to report investment and retirement accounts and compulsory savings plans managed by their country of residence  In a meeting we convened with an organization representing tax attorneys, they told us taxpayers are unsure about what account values to report on the Form 8938  Tax practitioners participating in another focus group added that they filed Forms 8938 regardless of the aggregate value of the assets because it was too cumbersome for them to identify whether the assets exceeded reporting thresholds as of the end of the year or at any time during the year  IRS officials also cited a number of possible reasons why U S  persons may be filing Forms 8938 unnecessarily  For example, it may be easier for U S  persons to report all specified foreign financial assets they hold on the Form 8938, rather than determine whether the value of such assets met applicable thresholds  IRS officials also said that U S  persons might complete a Form 8938 for reasons besides meeting tax-filing requirements, such as providing evidence of assets for a loan application  IRS’s Taxpayer Bill of Rights states that taxpayers are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence  Furthermore, one of IRS’s strategic goals is to empower taxpayers by making it easier for them to understand and meet their filing, reporting, and payment obligations  IRS officials said they hosted sessions for tax practitioners at IRS Nationwide Tax Forums to address FATCA reporting requirements  However, they said IRS has not taken direct steps to identify or implement actions to further clarify instructions and related guidance on IRS’s website for completing Form 8938, such as information on which foreign financial assets to report, how to calculate asset values, and determine whether such values exceed required reporting thresholds  Additionally, IRS officials said they have not conducted additional outreach to educate taxpayers on required reporting thresholds under FATCA, or notify Form 8938 filers of instances where aggregate values of specified foreign financial assets reported on Forms 8938 were below reporting thresholds  IRS officials said they have not made efforts to determine whether there is a pattern of unnecessary Form 8938 filings that they could address  Rather, they said they believed resources should be devoted to FATCA implementation in general  However, as shown above, we have identified many tens of thousands of instances where U S  persons may have filed Forms 8938 unnecessarily  Without assessing factors contributing to unnecessary Form 8938 reporting—and identifying or implementing actions to further clarify and educate taxpayers on FATCA reporting requirements—IRS is missing opportunities to help taxpayers understand their filing and reporting obligations and minimize their compliance burdens while properly meeting their tax obligations  Additionally, IRS may be missing opportunities to reduce costs in processing forms that taxpayers did not need to file  Because of overlapping statutory reporting requirements, IRS and FinCEN—both bureaus within Treasury—collect duplicative foreign financial asset data using two different forms (Form 8938 and FBAR)  Our evaluation and management guide for fragmentation, overlap, and duplication states that overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries  Table 3 shows that individuals required to report foreign financial assets on Form 8938, in many cases, also must meet FBAR reporting requirements  For example, specified individuals with foreign financial accounts exceeding $50,000 in aggregate value on the last day of the tax year must file both Form 8938 and FBAR if such values exceed the minimum Form 8938 thresholds; these thresholds depend on the filing status and address of specified individuals  Table 3 also shows that, in many cases, specified interests in foreign financial assets as defined in Form 8938 instructions are the same as the financial interest in such assets under FBAR  Further, as noted in table 3, the overlapping requirements lead to IRS and FinCEN collecting the same information on certain types of foreign financial assets  For example, both Form 8938 and FBAR collect information on foreign financial accounts for which a person has signature authority and a financial interest in the account  Form 8938 and FBAR also both collect duplicative information on several other types of foreign financial assets, such as foreign mutual funds and accounts at a foreign financial institution that include foreign stock or securities  Overlapping reporting requirements result in most Form 8938 filers also filing an FBAR during the same reporting year  Table 4 shows that close to 75 percent of Form 8938 filers in tax years 2015 and 2016 percent also filed an FBAR for the same year using the same TIN  Overlapping requirements to file both Form 8938 and FBAR increases the compliance burden on U S  persons and adds complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting  Focus group participants in all five countries included in our study affirmed that U S  persons experienced confusion and frustration with having to report duplicative foreign financial asset information on both forms  Focus group participants and others we interviewed also noted that U S  persons incurred additional financial costs to complete and file both Form 8938 and FBAR  For instance, one tax practitioner in Canada said the charge was about $190 to report four-to-five accounts on an FBAR in addition to charging about $540 for basic tax return packages  An accounting firm based in Japan typically charged between $300 and $800 to complete a Form 8938 and between $150 and $500 to complete an FBAR, depending on the number of accounts reported on the forms  Proposed revisions to regulations implementing BSA proposed by FinCEN may also increase the number of duplicative foreign financial accounts reported on Form 8938 and FBAR  Currently, U S  persons must report detailed information on all foreign financial accounts on Form 8938 if the value of such accounts and other specified foreign financial assets reaches applicable reporting thresholds  In contrast, U S  persons are generally exempted from reporting detailed account information on FBARs if they report having signature or other authority over 25 or more foreign financial accounts  FinCEN’s proposed revisions to BSA regulations would eliminate the exemption, requiring U S  persons to report detailed information on all foreign financial accounts in which he or she has a financial interest if the value of such accounts exceed FBAR’s $10,000 reporting threshold  FinCEN estimated that it will receive account information for the first time on about 5 4 million foreign financial accounts if it finalizes the proposed revisions  In turn, these revisions may lead to increased filings of duplicative asset data on both Form 8938 and FBAR, as U S  persons may have to report detailed information on all foreign financial accounts using both forms  U S  persons also face exposure to two different penalty regimes for any failures in accurately and completely reporting foreign financial asset information to two bureaus within Treasury—IRS and FinCEN  Officials from one organization representing U S  persons living abroad said penalties due to failure to report certain accounts on one or both forms can be significant, even if little or no taxes are owed on those accounts  The duplicative reporting of foreign financial asset data on two different forms also creates additional costs to the government to process and store the same or similar information twice, and enforce reporting compliance with both requirements  In 2012, we recommended that Treasury direct the Office of Tax Policy, IRS, and FinCEN to determine whether the benefits of implementing a less duplicative reporting process exceed the costs and, if so, implement that process  Treasury did not implement our recommendation  While we continue to believe that the agencies should have considered whether less duplicative reporting could have been implemented, we do recognize that FATCA and FBAR were enacted under two different statutes to serve different purposes  As mentioned above, according to IRS, FATCA improves visibility into taxable income from foreign sources and enhances the agency’s ability to identify and pursue taxpayer noncompliance  In contrast, the information reported on the FBAR is collected to identify money laundering and other financial crimes; law enforcement agencies can use BSA information—including information collected from FBARs— to aid regulatory and criminal investigations  Additionally, data collected from Form 8938 and FBAR are used in different systems for use by different bureaus within Treasury  Fully addressing issues stemming from overlapping reporting requirements and the resulting collection of duplicative information—while at the same time ensuring that such information can be used for tax compliance and law enforcement purposes—can only be done by modifying the statutes governing the requirements  Further, IRS and FinCEN have varying degrees of access to foreign financial asset information collected from Form 8938 and FBAR to enforce tax compliance and financial crime laws  FATCA was enacted, in part, to improve visibility into taxable income from foreign sources  However, information provided on Forms 8938 is taxpayer return information protected by section 6103 of the Internal Revenue Code (IRC), which generally prohibits IRS from disclosing information provided on Forms 8938  IRS can share return information with other government agencies and others when it is allowed by statute  For example, under section 6103, IRS may disclose return information related to taxes imposed under the IRC—such as self-employment income tax, Social Security and Medicare tax and income tax withholding—to the Social Security Administration (SSA) as needed to carry out its responsibilities under the Social Security Act  However, according to FinCEN officials, FinCEN, law enforcement, and regulators often cannot access information submitted on Forms 8938  While section 6103 provides other exceptions to disclosure prohibitions—such as allowing IRS to share return information with law enforcement agencies for investigation and prosecution of nontax criminal laws—such information is generally only accessible pursuant to a court order  As noted above, information reported on the FBAR can be used by law enforcement agencies to aid regulatory and criminal investigations  This includes IRS, which has been delegated responsibility from FinCEN to enforce compliance with FBAR reporting requirements  IRS has used FBAR information in addressing taxpayer noncompliance with reporting and paying taxes on foreign assets and income  For example, taxpayers accepted into one of IRS’s offshore voluntary disclosure programs must have filed amended or late FBARs as part of their program applications  Investigators from IRS’s Criminal Investigation division generally reviewed applications to determine if the taxpayer has made a complete and truthful disclosure  IRS examiners can also use information from case files of program participants—such as information disclosed on FBARs— to identify new groups of taxpayers suspected of hiding income offshore  IRS can then choose to continue offering offshore programs and encourage these newly identified groups of taxpayers, as well as all taxpayers with unreported offshore accounts, to disclose their accounts voluntarily  In addition to eliminating overlapping reporting requirements, harmonizing statutes governing foreign financial asset reporting and use of information collected on such assets to make such statutes fully consistent could yield additional benefits to both IRS and the law enforcement community  Specifically, and as shown in appendix IV, there are specified foreign financial assets reported on Form 8938—such as foreign hedge funds and foreign private equity funds—that are not required to be reported on an FBAR  In contrast, there are other specified foreign financial assets reported on an FBAR—such as indirect interests in foreign financial assets through an entity—that are not required to be reported on Form 8938  Without congressional action to address overlap in foreign financial asset reporting requirements, IRS and FinCEN will neither be able to coordinate efforts to collect and use foreign financial asset information, nor reduce unnecessary burdens faced by U S  persons in reporting duplicative foreign financial asset information  Two reporting systems for sharing foreign account information from foreign financial institutions are in operation globally—FATCA and the Common Reporting Standard (CRS)  According to officials from banking associations and a consulting firm, FFIs in the countries where we examined FATCA implementation encountered challenges implementing and now maintaining two overlapping reporting systems for collecting and transmitting account information to other countries for a seemingly similar purpose, and collecting sufficient information from customers to ensure they meet the requirements of both systems  As noted above, we previously identified overlap as occurring when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries  According to an IRS official, collecting account information under FATCA ushered in an era of greater transparency; as noted above, FATCA’s passage sought to reduce tax evasion by creating greater transparency and accountability with respect to offshore accounts and other assets held by U S  taxpayers  When FATCA was first introduced, there was no international platform to share account information between countries  The United States and other countries worked together to reach an agreement on the electronic formatting that would be used to share the information  Other countries tax authorities’ became more interested in understanding the financial assets held abroad by their residents through an exchange of account information among themselves  In response, the Organisation for Economic Co-operation and Development (OECD) established the CRS reporting system for automatic exchange of information among member countries  According to the OECD, CRS was developed with a view to maximize efficiency and reduce cost for financial institutions  Thus, CRS drew extensively on the intergovernmental approach used to implement FATCA reporting requirements for FFIs  Countries participating in CRS exchange account information with each other using OECD’s Common Transmission System, which was modeled on FATCA’s International Data Exchange System  Figure 2 depicts the flow of account information between countries under FATCA and CRS  CRS reporting requirements are in many ways similar to FATCA, including required reporting of the account holders’ name and address, taxpayer identification number, account number, account balance, and income and sales proceeds  However, the requirements differ in significant ways  The biggest differences in requirements are driven by the nature of the U S  tax system  The United States, like many countries, generally taxes citizens and resident aliens on their worldwide income regardless of where that income is earned  However, the United States differs from other countries because it generally subjects U S  citizens who reside abroad to U S  taxation in the same manner as U S  residents  In contrast to U S  policy, most other countries do not tax their citizens if they reside in a country other than their country of citizenship  Further, IGAs implementing FATCA require FFIs to report the foreign-held accounts of U S  citizens and residents—including resident aliens—while CRS requires financial institutions in jurisdictions participating in CRS to report on almost all accounts held by nonresidents of the reporting country  Appendix V provides more detailed information on differences in reporting requirements, due diligence requirements, and definitions under FATCA and CRS  These differences in tax systems drive variations in due diligence procedures between FATCA and CRS  For example, FATCA aims to identify whether an account holder at a foreign institution is a U S  person based on citizenship and tax residency information  In contrast, CRS aims to identify the tax residency of all account holders of a financial institution, and does not consider citizenship  Due to the multilateral nature of CRS, if an account holder is determined on the basis of the due diligence procedures to have residency in two or more countries, information would be exchanged with all jurisdictions in which the account holder is determined a resident for tax purposes  Under CRS rules, information about foreign accounts held by a U S  citizen with a tax residence abroad would not be reported to IRS, but rather to the jurisdiction in which they were a resident for tax purposes  Because the United States taxes the worldwide income of U S  citizens, CRS rules would need to require identification of account holders’ citizenship in member countries where they are residents if FATCA were to be aligned with CRS  Table 5 shows a comparison of individuals reported to IRS under FATCA and hypothetically under CRS  Treasury and IRS, as part of its 2017-2018 Priority Guidance Plan, are considering modifying certain elements of the existing FATCA regulations  For instance, Treasury and IRS are considering coordinating certain documentation requirements for participating FFIs with the requirements under IGAs  In December 2018, Treasury and IRS also proposed regulations intended, in part, to reduce the burdens of FATCA  The proposed regulations included a clarification of the definition of an investment entity that is similar to the guidance published by OECD interpreting the definition of a “managed by” investment entity under CRS  If the United States wanted to adopt CRS, some of the key differences between FATCA and CRS—as outlined above and in appendix V—could be aligned through regulation while others would require legislation  According to Treasury officials, to align FATCA and CRS, Congress would need to revise statutes to: provide for the collection of information for accounts that residents of partner jurisdictions maintain at U S  financial institutions; require certain U S  financial institutions to report the account balance (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) for all financial accounts maintained at a U S  office and held by foreign residents; expand the current reporting required with respect to U S  source income paid to accounts held by foreign residents to include similar non-U S  source payments; require financial institutions to report the gross proceeds from the sale or redemption of property held in, or with respect to, a financial account; and require financial institutions to report information with respect to financial accounts held by certain passive entities with substantial foreign owners  While better aligning FATCA and CRS to some extent is possible, anything short of the United States fully adopting CRS would not fully eliminate the burdens of overlapping requirements that FFIs must currently meet under the two different systems  While having the United States adopt the CRS reporting system in lieu of FATCA could benefit FFIs that may otherwise have to operate two overlapping reporting systems, it would result in no additional benefit to IRS in terms of obtaining information on U S  accounts  Additionally, it could generate additional costs and reporting burdens to U S  financial institutions that would need to implement systems to meet CRS requirements  The extent of these costs is unknown  Further, adoption of CRS would create the circumstance where foreign accounts held by U S  citizens with a tax residence in partner jurisdiction—including U S  citizens who have a U S  tax obligation—would not be reported to IRS  Tax practitioners and others we interviewed said that U S  persons living abroad—whether or not they are required to complete a Form 8938—risk being denied access to foreign financial services  U S  persons and tax practitioners located in four of the five countries where we conducted focus groups and interviews reported that some U S  persons and U S - owned businesses encountered difficulties opening bank accounts with FFIs after FATCA was enacted, with some FFIs closing U S  persons’ existing accounts or denying them opportunities to open new accounts  One focus group participant, for example, said that the financial institution closed down all accounts including business checking, savings, and money market accounts after FATCA was implemented, requiring this individual to find a local resident who could co-sign on a new account  Costs FFIs would incur from implementing FATCA were cited as a significant factor in increasing barriers faced by U S  persons in accessing foreign financial services  Officials from one organization representing tax attorneys said that as a result of costs associated with FATCA implementation, FFIs have found it less burdensome to close accounts of U S  persons or require the accounts to be moved to a Securities and Exchange Commission registered affiliate than comply with FATCA  Tax practitioners and an official from a bankers association added that because FFIs may gain only small margins of profit from U S  persons, FFIs may believe it is too troublesome to do business with them  Additionally, officials from a foreign government agency told us that because FATCA is expensive for FFIs to continue implementing, banks in their country might charge U S  persons seeking access to financial services additional fees to account for FATCA implementation costs  Tax practitioners, consultants working with FFIs to implement FATCA reporting requirements, and the National Taxpayer Advocate told us that FFIs with smaller asset sizes such as smaller trust companies were more prone to decline business with U S persons  Officials from an advocacy group representing U S  persons living abroad told the National Taxpayer Advocate that some smaller banks declined U S  persons as customers as a business decision, believing it would cost more for them to comply with FATCA reporting requirements than maintain U S  expatriates’ accounts  Banking associations we interviewed said that decisions made by FFIs on whether to accept U S  persons as customers also depends on the overall risks and benefits of taking on individual U S  persons, shaped in part from risks in not meeting FATCA reporting requirements  Representatives of a banking association and an advocacy group told us that some FFIs decided to avoid doing business with U S  persons after they became concerned about potential penalties for failure to comply—either willfully or in error—with FATCA reporting requirements  One banking association added that such errors could affect other aspects of FFIs’ relationships with the U S  government, such as nonprosecution agreements made with the U S  Department of Justice  Officials from one consulting firm that helped FFIs meet FATCA reporting requirements added that FFIs’ determination of risk depends on many layers, such as the value of clients’ assets or the country in which clients reside or possess citizenship  After FATCA’s implementation, according to officials from the consulting firm, FFIs decided to turn away U S  persons in some cases because the benefits of doing business with U S  persons were less than the potential risks  For example, if a U S  person only maintained a payroll account, the FFI may determine it would not make enough money to account for risks in incorrectly identifying the status of the customer as a U S  or non-U S  person  However, focus group participants from two countries said that FFIs may agree to accept U S persons as customers if they have higher account balances that offset risks from FATCA reporting requirements  One focus group participant, for instance, said banks in his country will do business with a U S  person if he or she has more than $500,000 in assets  Additionally, U S  persons and tax practitioners we interviewed said that other factors such as language barriers and U S  regulations designed to prevent money laundering may also inhibit U S  persons’ access to brokerage accounts while overseas  Focus group participants and others we interviewed said that Form 8938 reporting requirements contributed to denials of employment and promotion opportunities for U S  persons living abroad  Treasury officials noted that requirements imposed by FATCA do not directly hinder U S  persons from gaining employment or promotion opportunities overseas  However, focus group participants, a consulting firm, and a foreign government agency noted that foreign-owned companies and nonprofit organizations such as churches did not want to hire or promote U S  persons because they wanted to avoid exposing information to the U S  government on their organizations’ accounts and client trust accounts where the U S  person would have signature authority  As noted above, a U S  person is generally required to report on the Form 8938 foreign financial accounts for which the person has signature authority if he or she has a financial interest in the account  Focus group participants and others noted that such requirements have adversely affected the ability of U S  persons to serve on a corporate board or in a nonprofit organization, or maintain business relationships  Treasury and Department of Commerce officials stationed in one country included in our review added that FATCA implementation has played a role in dissuading foreign-owned corporations in some Asian countries from considering U S  persons for corporate leadership positions such as directorships  This is in part because FATCA has triggered additional paperwork burden and operating costs for onboarding U S  employees since they have had to help them meet Form 8938 reporting requirements  Two advocacy groups representing U S  persons living abroad added that it is also harder for U S -based companies to justify relocating U S  persons overseas and paying for such relocations since they also have had to help their U S  employees meet Form 8938 reporting requirements in addition to meeting other tax filing requirements  U S  embassy documents indicate there was increased demand for Social Security Numbers (SSN) since FATCA’s passage in 2010, driven in part by U S  citizens applying for an SSN to gain access to foreign financial services or resolve outstanding U S  tax obligations before completing renunciation  However, officials from two organizations representing Americans living abroad cited significant challenges faced by some U S  persons living abroad in obtaining SSNs required to meet their U S  tax obligations or obtain financial services  U S  persons living abroad might not possess an SSN because their parents did not obtain one for them as a minor  Often, this may have been due to the parents leaving the United States when the child was young  State officials also said that U S  citizens applying for U S  passports while overseas frequently forget their SSNs or do not know if their parents ever applied for an SSN on their behalf  Officials from organizations representing U S  persons living abroad added that without an SSN, these persons are unable to claim refunds or other tax benefits when filing their tax returns, or participate in IRS programs to voluntarily disclose previously unreported tax liabilities and assets  Additionally, some might be unable to gain or maintain access to financial accounts or other assets in their countries of residence without an SSN  According to these officials and tax practitioners we interviewed, U S  persons living abroad face greater challenges in obtaining SSNs than those living in the United States  For instance, they faced difficulties obtaining documentation from the United States that the Social Security Administration (SSA) requires with SSN applications; traveling to Social Security offices and U S  embassies or consulates to certify documents or submit applications in person; and receiving valid SSNs from SSA in a timely manner to file tax returns or participate in offshore disclosure programs  SSA officials also identified several challenges U S  persons experience when applying for an SSN from abroad  For instance, SSA officials said that efforts to authenticate documents submitted with SSN applications can cause delays for U S  persons living abroad in obtaining an SSN  Additionally, SSN applicants living abroad face significantly longer wait times than applicants living in the United States once their applications are processed  According to SSA officials, after an application is processed, it can take 3 to 6 months–-depending on the country’s mail service–-for an individual to receive a Social Security Card  This is significantly longer than the 2-week period it takes SSN applicants to receive a card after mailing in their applications from within the United States  According to Department of State (State) data, the annual number of approvals of requests for renunciations of U S  citizenships increased nearly 178 percent during a 6-year period, from 1,601 in 2011—the year after FATCA was enacted—to 4,449 in 2016, the most recent year to which full data on renunciations were available  According to U S  embassy documents and information provided by focus group participants and interviewees across all the countries we examined, FATCA was the reason or a contributing factor in some of these decisions and the resulting increase in total renunciations  Specific effects of FATCA implementation contributing to decisions to renounce U S  citizenship included reduced access to foreign financial services and employment or promotion opportunities in a foreign-owned company—as identified above from our document reviews, focus groups, and interviews—and burdens in meeting FATCA reporting requirements  However, the extent to which FATCA implementation contributed to increased renunciations is unclear  State officials said that data are unavailable to determine the extent to which these renunciation decisions were the direct result of FATCA because State has no legal obligation to collect information on the motivation behind renunciation of citizenship  In response to concerns about the availability of foreign financial services, Treasury implemented regulations that allow certain low-risk local FFIs to be deemed compliant with FATCA, but only if the FFIs do not implement policies or practices that discriminate against opening or maintaining accounts for specified U S  persons  Treasury and State also previously established joint strategies to address these challenges  For instance, Treasury and State developed guidance on FATCA that was posted on embassy websites to educate U S  persons and others  Additionally, Treasury and State officials conducted outreach events and workshops through U S  embassies and American chambers of commerce worldwide to provide information on FATCA and other tax filing requirements, According to State officials, the U S  embassies in at least two countries—Switzerland and France—also worked with foreign officials and/or FFIs to increase access to financial services for U S  citizens residing in those countries  For instance, Treasury and State officials reached agreements with FFIs in Switzerland to provide a wider range of financial services to U S  persons  Similarly, in 2017, SSA and State implemented an interagency agreement to streamline processes for providing SSNs to U S  persons living abroad after FATCA’s implementation in 2010  SSA officials said they are also in discussions with State on improving SSA’s website to include more transparent, specific information for SSN overseas applicants about SSA documentation requirements  Tax practitioners, advocacy groups, and Treasury officials we interviewed said FFIs have become more willing to accept U S  persons as customers compared to when FATCA was enacted in 2010  However, U S  persons living abroad continue to face issues gaining access to foreign financial services  For example, in a September 2018 letter sent by the Chair of the Finance Committee of the Netherlands House of Representatives to a member of Congress, U S  citizens born outside the United States and who have never lived, studied, or worked in the United States are effectively being denied access to financial services in the Netherlands  Focus group participants added that some banks will reject U S  clients or charge heavy fees for them to open an account  Agencies have ongoing efforts to address FATCA-related issues, as listed below, but some are ad hoc, fragmented, or otherwise not part of a broader effort between Treasury and other agencies such as State or SSA to use ongoing collaborative mechanisms to monitor and share information on such issues, and jointly develop and implement steps to address them: Treasury officials said they are participating in discussions with FFIs to address residual issues with access to foreign financial services  However, they said they have not involved other agencies in these discussions  IRS officials, in response to concerns from the French government, said they are developing a program to help streamline foreign asset- related tax compliance requirements for a small group of U S  born citizens that have been French residents most of their lives without an SSN, and—according to State officials—did not wish to take the necessary steps to renounce their citizenship  However, no effort has been made to address these issues more broadly  State encouraged U S  citizens to alert the nearest U S  embassy of any practices they encounter with regard to the provision of financial services  State documents noted that some Americans have been turned away by banks or required to meet a higher deposit threshold in part because of FATCA reporting requirements  State documentation also noted that there have been cases of U S  citizens with existing bank accounts who have been asked to close them  However, State documentation we reviewed does not highlight collaborative efforts currently underway with Treasury or other agencies to address banking access issues U S  persons living abroad are presently encountering worldwide  As described above, SSA and State streamlined processes and policies for U S  persons abroad seeking to obtain SSNs  However, SSA officials said they have not been involved in any ongoing efforts involving Treasury to identify systemic issues and related solutions involving SSNs for the purposes of tax compliance and citizenship renunciations  Treasury officials said they spoke with SSA officials about problems U S  persons living abroad face in obtaining SSNs, but SSA believed that cycle times for processing SSN applications submitted by U S  persons living abroad were not significantly greater than for applications submitted by U S  persons living in the United States, although mailing times could vary significantly and take up to 3 to 6 months  We have previously identified key practices to enhance and sustain interagency collaboration, including defining and articulating a common outcome, establishing mutually reinforcing or joint strategies, and developing mechanisms to monitor, evaluate, and report on results  One goal in IRS’s strategic plan is to collaborate with external partners proactively to improve tax administration, while objectives in SSA’s strategic plan include improving service delivery and expanding service delivery options  Additionally, according to State’s Bureau of Consular Affairs website, one of State’s key priorities is to protect the interests of U S  citizens overseas, such as through ensuring responsive and efficient provision of consular services overseas  As noted above, there are a host of ongoing issues and challenges for U S  persons living abroad from implementation of FATCA, such as loss of access to foreign financial services, denial of employment and promotion opportunities overseas, and difficulty obtaining SSNs from abroad  However, Treasury currently lacks a collaborative mechanism to coordinate efforts with other agencies to address these issues, and Treasury officials said they do not plan to establish them  Without effective collaborative mechanisms to monitor and share information and implement cross-agency solutions, future efforts to address such issues will continue to be fragmented and less effective than they otherwise could be  In enacting FATCA, Congress sought to reduce tax evasion by creating greater transparency and accountability over offshore assets held by U S  taxpayers  Because of FATCA, IRS receives information on foreign financial assets from hundreds of thousands of filers annually  IRS could use this information to help ensure taxpayers holding offshore assets report and pay taxes owed on income generated from such assets  However, to take full advantage of the information, IRS must address key challenges  Specifically, Taxpayer Identification Numbers (TIN) reported by FFIs are often inaccurate or incomplete, which makes it difficult for IRS to match information reported by FFIs to individual taxpayers  As such, IRS must develop a plan to mitigate the risks that these data issues pose to agency efforts to identify and combat taxpayer noncompliance  Lack of consistent, complete, and readily available Form 8938 and related parent individual tax return data also affects IRS’s compliance activities, making it more difficult for IRS business units to extract and analyze FATCA data to improve tax compliance efforts and reduce tax revenue loss from income generated from offshore assets  At the same time, IRS has stopped following its FATCA Compliance Roadmap it developed in 2016 because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns  However, in light of the challenges IRS continues to face in fully integrating FATCA information into its compliance programs, it will not maximize use of such information and effectively leverage individual compliance campaigns unless it employs a comprehensive plan that enables IRS to better leverage such campaigns to improve taxpayer compliance  Our analysis of available data indicates that many of the Forms 8938 filed in tax year 2016 may have been filed unnecessarily  Factors that are contributing to this unnecessary reporting are unclear  While IRS has provided instructions and guidance on its website for completing Form 8938, focus group participants and tax practitioners reported confusion on whether and how to report investments in foreign accounts  Taking steps to identify and address factors contributing to unnecessary Form 8938 reporting would help reduce taxpayer burden and reduce processing costs for IRS  Reporting requirements for foreign financial assets under FATCA overlap with reporting requirements under FBAR  These overlapping requirements—implemented under two different statutes—have resulted in most taxpayers filing Forms 8938 also filing FBARs with FinCEN  Duplicative filings on foreign financial assets cause confusion, frustration, and compliance burdens for taxpayers  Duplicative filings also increased costs to the government to process and store the same or similar information  Modifying the statutes governing the requirements can fully address the issues outlined above, and can allow for the use of FATCA information for prevention and detection of financial crimes  This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding  Lastly, FATCA has created challenges for some U S  persons living abroad that go beyond increasing their tax compliance burdens  Some U S  persons living abroad are still facing issues accessing financial services and employment and obtaining SSNs  Treasury, State, and SSA have taken some steps to address these issues both separately and in coordination with each other  However, Treasury, as the agency ultimately responsible for effective administration of FATCA, currently lacks a collaborative mechanism with State and SSA to address ongoing issues  Establishing a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help agencies develop effective solutions to mitigate such burdens  We are making the following matter for congressional consideration: Congress should consider amending the Internal Revenue Code, Bank Secrecy Act of 1970, and other statutes, as needed, to address overlap in foreign financial asset reporting requirements for the purposes of tax compliance and detection, and prevention of financial crimes, such as by aligning the types of assets to be reported and asset reporting thresholds, and ensuring appropriate access to the reported information  We are making the following four recommendations to IRS: The Commissioner of Internal Revenue should develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U S  account holders collected from FFIs  (Recommendation 1) The Commissioner of Internal Revenue should ensure that appropriate business units conducting compliance enforcement and research have access to consistent and complete data collected from individuals’ electronic and paper filings of Form 8938 and elements of parent individual tax returns  As part of this effort, the Commissioner should ensure that IRS provides clear guidance to the business units for accessing such data in IRS’s Compliance Data Warehouse  (Recommendation 2) The Commissioner of Internal Revenue should employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts  The plan should document and track activities over time to ensure individuals and FFIs comply with FATCA reporting assess and mitigate data quality risks from FFIs; improve the quality, management, and accessibility of FATCA data for compliance, research, and other purposes; and establish, monitor, and evaluate compliance efforts involving FATCA data intended to improve voluntary compliance and address noncompliance with FATCA reporting requirements  (Recommendation 3) The Commissioner of Internal Revenue should assess factors contributing to unnecessary Form 8938 reporting and take steps, as appropriate, to address the issue  Depending on the results of the assessment, potential options may include: identifying and implementing steps to further clarify IRS Form 8938 instructions and related guidance on IRS’s website on determining what foreign financial assets to report, and how to calculate and report asset values subject to reporting thresholds; and conducting additional outreach to educate taxpayers on required reporting thresholds, including notifying taxpayers that may have unnecessarily filed an IRS Form 8938 to reduce such filings  (Recommendation 4) We are also making the following recommendation to Treasury: The Secretary of the Treasury should lead efforts, in coordination with the Secretary of State and Commissioner of Social Security, to establish a formal means to collaboratively address ongoing issues— including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 5) We are also making the following recommendation to State: The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 6) We are also making the following recommendation to SSA: The Commissioner of Social Security, in coordination with the Secretaries of State and Treasury, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 7) We provided a draft of this report to the Secretaries of State and the Treasury, Commissioner of Internal Revenue, and Acting Commissioner of Social Security  IRS provided written comments that are summarized below and reprinted in appendix VI  IRS did not state whether it agreed or disagreed with our four recommendations but otherwise provided responses  Regarding our recommendation to develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U S  account holders collected from FFIs (recommendation 1), IRS reiterated that it provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs in countries with Model 1 IGAs with the United States  IRS also said that it continued to make progress on improving FATCA filing compliance, citing efforts such as initiating a campaign addressing FFIs that do not meet their compliance responsibilities  While these efforts may help IRS obtain more accurate and complete information from financial accounts, IRS did not specify how it will mitigate the ongoing hurdles it faces in matching accounts reported by FFIs without valid TINs to accounts reported by individual tax filers and ensure compliance  Regarding our recommendation that appropriate business units have access to consistent and complete data collected from Forms 8938 and tax returns filed by individuals (recommendation 2), IRS reiterated that RAAS has been working to obtain read-only access to the IPM database but that limited budgetary resources are delaying implementation  Enabling access to consistent and complete Form 8938 and tax return data would help IRS better target compliance initiatives and leverage limited available enforcement resources  While IRS continues to work on enabling access to IPM, it could still provide clear guidance to its business units for accessing Form 8938 and tax return data in IRS’s Compliance Data Warehouse, as we recommended  Regarding our recommendation to employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts (recommendation 3), IRS said the resources that would be required to develop a comprehensive plan would be better spent on enforcement activities  While implementing enforcement activities could increase compliance with FATCA reporting requirements, it risks not maximizing the value of such efforts without a comprehensive plan to manage and address the myriad of challenges discussed in this report  Further, it is our belief that IRS’s failure to execute the FATCA roadmap is not justification for abandoning a strategic approach going forward  Regarding our recommendation to assess factors contributing to unnecessary Form 8938 reporting and take appropriate steps to address the issue (recommendation 4), IRS said it will continue to observe filings of Form 8938 and, to the extent that there are unnecessary filings, assess options to inform account holders to reduce reporting and filing burdens followed by appropriate steps to implement any selected options  Our analysis of available data indicates that many Forms 8938 may have been filed unnecessarily  Implementing our recommendation reduces the risk that taxpayers file—and IRS processes—forms unnecessarily  Treasury provided written comments but did not state whether it agreed or disagreed with our recommendation that it lead efforts, in coordination with State and SSA, to establish a formal means to collaboratively address ongoing issues that U S  persons living abroad encounter from implementation of FATCA reporting requirements (recommendation 5)  Treasury said it will work collaboratively with State and SSA to answer questions that Americans abroad have regarding their tax obligations and, where appropriate, to direct U S  citizens to resources that will help them understand the procedures applied by SSA to apply for an SSN  However, Treasury said it is not the appropriate agency to lead coordination efforts involving foreign employment issues and issues regarding access to foreign financial services and obtaining SSNs  As we noted above, Treasury is ultimately responsible for effective administration of FATCA  As such, it is in a better position than State or SSA to adjust regulations and guidance implementing FATCA to address burdens FFIs and foreign employers face from FATCA implementation while ensuring tax compliance  Additionally, Treasury has an interest in helping U S  persons receive valid SSNs from SSA in a timely manner to meet their tax obligations  Treasury’s written response is reprinted in appendix VII  State and SSA also provided written comments in which they concurred with our recommendations to establish a formal means to address collaboratively together with Treasury ongoing issues that U S  persons living abroad encounter with FATCA (recommendations 6 and 7)  State and SSA’s written comments are reprinted in appendices VIII and IX, respectively  Treasury, State, and SSA provided technical comments, which we incorporated as appropriate  We are sending copies of this report to the appropriate congressional committees, the Secretaries of State and the Treasury, Commissioner of Internal Revenue, Acting Commissioner of Social Security, and other interested parties  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao gov  Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report  GAO staff who contributed to this report are listed in appendix X  The objectives of this report are to (1) assess the Internal Revenue Service’s (IRS) efforts to use information collected under the Foreign Account Tax Compliance Act (FATCA) to improve taxpayer compliance; (2) examine available foreign financial asset reports submitted by U S  persons, including submissions that were below required filing thresholds; (3) examine the extent to which the Department of the Treasury (Treasury) administers overlapping reporting requirements on foreign financial assets; (4) describe similarities and differences between FATCA and Common Reporting Standard (CRS) reporting requirements; and (5) examine the effects of FATCA implementation that are unique to U S  persons living abroad  For our first objective, we reviewed Treasury Inspector General for Tax Administration reports and collected information from Treasury and IRS to summarize efforts to collect complete and valid Taxpayer Identification Numbers (TIN) from foreign financial institutions (FFI)  We identified criteria from our prior work identifying key practices for risk management  The key practices are derived from the Software Engineering Institute’s Capability Maturity Model® Integration for Development and Office of Management and Budget guidance  We applied these criteria to assess steps IRS has taken to manage risks in not receiving complete and valid TIN information from FFIs  We also applied criteria from our prior work on use of documented frameworks to IRS documentation on FATCA compliance activities to determine the extent to which IRS implemented a comprehensive plan to maximize use of collected data to enforce compliance with FATCA  For our second objective, we identified total maximum account values reported by individual filers of Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016  See appendix III for more details on our methodology to evaluate these data  We also summarized the numbers of IRS Forms 8938, Statement of Specified Foreign Financial Assets (Form 8938) filed in tax year 2016, accounting for the data limitations described below  We also identified Forms 8938 filed in tax year 2016—the most recent year for which data were available—with available residency and asset information that reported specified foreign financial assets with aggregate values at or below end-of-year tax thresholds, which vary depending on the location of residence and filing status of such filers  For our third objective, we reviewed IRS and FinCEN documentation, and applied criteria from Fragmentation, Overlap, and Duplication: An Evaluation and Management Guide to identify the extent to which IRS and FinCEN were engaged in overlapping activities, and collecting duplicative information on foreign financial assets held by U S  persons  We assessed the extent to which individual filers who submitted a Form 8938 in 2015 and 2016 also submitted an FBAR for the same year by determining the number and percentage of Forms 8938 with TINs that also match the TIN listed on the corresponding FBAR for the same year  For the three objectives described above, we assessed the reliability of data submitted on Forms 8938 filed by individuals for tax years 2015 and 2016, the most recent data available  These data were extracted from IRS’s Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) through IRS’s Compliance Data Warehouse (CDW)  We also assessed the reliability of data from FBARs for calendar years 2015 and 2016 by (1) reviewing documentation about the data and the systems that produced them; (2) conducting electronic tests, such as identifying data with significant numbers of missing Form 8938 or FBAR records, or values of foreign financial assets reported outside an expected range; (3) tracing selections or random samples of data to source documents; and (4) interviewing IRS and FinCEN officials knowledgeable about the data  We also reviewed Form 8938 and relevant parent tax return data stored in IRS databases to determine whether IRS management is using quality information collected from Forms 8938 to achieve its objectives, as defined in our Standards for Internal Control in the Federal Government  We determined that data extracted from IRTF on characteristics of Form 8938 filers and from FBAR filings was sufficiently reliable for our purposes, subject to caveats identified in this report  However, we determined we could not obtain complete data on foreign financial assets reported on Forms 8938 filed on paper  For our fourth objective, we reviewed model international agreements and other documentation, and interviewed officials from Treasury, IRS, and the Organisation for Economic Co-operation and Development to compare and contrast FATCA and CRS reporting requirements  We also used the collected information to identify what changes, if any, the United States and other countries could implement to align FATCA and CRS reporting requirements  For our fifth objective, we collected documentation and conducted focus groups and semi-structured interviews with 21 U S  persons living abroad that were subject to FATCA reporting requirements  We also conducted focus groups and interviews with tax practitioners, banking and CPA organizations, government agencies, advocacy groups representing Americans living abroad, and other organizations from the United States and five other countries (Canada, Japan, Singapore, Switzerland, and the United Kingdom)  We selected these countries based on geography, relatively high numbers of U S  expatriates and Form 8938 filers, tax information sharing agreements, and other tax treaties with the United States  The findings from the focus groups and interviews are not generalizable to other U S  persons, tax practitioners or organizations, but were selected to represent the viewpoints of U S  persons, FFIs, and host country tax authorities required to transmit information on foreign accounts and other specified foreign financial assets to IRS  We conducted a thematic analysis of the focus groups and interviews, and reviewed cables from U S  embassies to identify the unique effects of FATCA implementation on U S  persons living abroad  We collected documentation from and interviewed Treasury, IRS, Department of State, and Social Security Administration officials on steps to monitor and mitigate such effects  We also identified criteria from our prior work on key practices to enhance and sustain interagency collaboration and mechanisms to facilitate coordination  We applied the criteria to agencies’ collaborative efforts addressing issues U S  persons living abroad faced from FATCA’s implementation, and identified the extent to which agencies established effective collaborative mechanisms to identify, assess, and implement cross-agency solutions to such issues  We conducted this performance audit from August 2017 to April 2019 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  The following IRS databases store data collected from individuals’ electronic and paper filings of Forms 8938 and/or elements of individual parent tax returns—the filer’s address and filing status—used to determine specified reporting thresholds for Form 8938 filers: Individual Master File (IMF), which serves as IRS’s system for processing individual taxpayer account data  Using this system, accounts are updated, taxes are assessed, and refunds are generated as required during each tax-filing period  Individual Returns Transaction File (IRTF), which stores edited, transcribed, and error-corrected data from the Form 1040 series and related forms for the current processing year and two prior years  Modernized Tax Return Database (MTRDB), which serves as the official repository of all electronic returns processed through IRS’s Modernized e-File system  Tax return data is stored immediately after returns are processed  International Compliance Management Model (ICMM)-FATCA International Returns (ICMM-FIR), which collects, parses, and stores data from incoming form reports–such as Forms 8938 and 8966–into the FATCA Database (FDB), which serves as the repository where ICMM-FIR stores data and from which downstream applications can pull data  Integrated Production Model (IPM), which is a downstream data repository that houses IMF data, information returns, and other data  According to IRS officials, data from IPM are consolidated and made available to a variety of downstream, security certified, systems for use in conducive analysis, case selection, and report preparation  Additionally, data from these and other IRS databases are copied to IRS’s Compliance Data Warehouse (CDW) periodically, which captures data from multiple production systems and organizes the data in a way that is conductive to analysis  Table 6 highlights several problems with the consistency and completeness of Form 8938 and relevant parent tax return data stored across the listed databases  Inconsistent and incomplete data on address and filing status of Form 8938 filers: As noted above, elements of parent tax returns— specifically the filer’s country of residence and filing status—are used to determine specified reporting thresholds for Form 8938 filers  However, IRTF and MTRDB have inconsistent and incomplete data on addresses linked to Form 8938 filers, and report inconsistent numbers of Forms 8938 filed from a U S  residence  For example, the variable identified as containing data on foreign countries of residence in IRTF shows approximately 8,100 foreign filers in tax years 2015 and 2016, whereas a similar variable in MTRDB shows approximately 89,000 foreign filers for those same years  Additionally, FDB does not contain country codes from paper filings of Form 8938  ICCM-FIR stores information from some elements from parent tax returns—such as TINs and document locator numbers  According to IRS officials, however, ICMM-FIR lacks data on country codes and filing status of Form 8938 filers  IRS officials said that ICMM-FIR was not designed or intended to store data on Form 8938 filers; rather, it was designed to be a database for use in comparing Form 8938 and 8966 data  In general, IRS officials indicated that they would like to adjust the way ICMM-FIR stores data, but that would require modifying the way the database was established  Incomplete data on assets reported on Forms 8938: MTRDB contains detailed information on specified foreign financial assets submitted on electronic filings of Form 8938 and the country code from which the Form 8938 was filed  IRS officials said it is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns  IRS officials said that while IMF processes information transcribed from individual income tax returns, there is no requirement to cross-reference information from the tax return with information submitted with an accompanying Form 8938  Additionally, while IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted from Forms 8938  When asked whether there is any move to store account and other asset information collected from Forms 8938 into IRTF, IRS officials said that the decision on what returns or portions of returns are transcribed are subject to resource constraints and are prioritized from year to year  Table 7 shows that more than 900,000 individuals filed Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1 5 trillion to more than $2 trillion each year  We are providing a range of estimates because we found a large number of filings made potentially in error  In some cases, for instance, FBAR filers reported more than $100 trillion in foreign financial accounts  We assume many of these filings are likely made in error, but have only limited means to determine which filings have errors, and which filings have accurate information  Because we cannot independently verify the accuracy of all self-reported FBAR data, we decided to present a range of data with (1) a lower bound discarding all FBAR filings reporting total values of reported foreign financial accounts at or above $1 billion; and (2) an upper bound discarding all filings reporting total values of such accounts at or above $5 billion  Table 2 excludes amended and duplicated FBAR filings  This table also excludes FBAR filings that reported a financial interest in 25 or more financial accounts, but reported total maximum account values of $0 from parts II and III of the FBAR  Although we identified problems with the data, we determined they were reliable enough to provide an estimated range of asset values to report the scale of foreign financial accounts held by U S  persons  Table 8 shows a detailed breakdown of 2015 and 2016 FBAR filings by residence and categories of total maximum account values reported on the FBARs  Appendix IV: Detailed Comparison of Individual Foreign Financial Asset Reporting Requirements 26 U S C  § 6038D; 26 C F R  §§ 1 6038D-1 to 1 6038D-8  26 C F R  § 1 6038D-2  Filers in this category include those who identify as single, married filing separately, “head of household,” or “qualifying widow(er) ” Includes maximum value of specified foreign financial assets (Form 8938) or maximum value of financial accounts maintained by a financial institution physically located in a foreign country (FBAR)  Under FATCA, any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account are or would be required to be reported, included, or otherwise reflected on a person’s income tax return  Under FBAR reporting requirements, a person has signature or other authority if he or she has the authority (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained  The account itself is subject to reporting, but the contents of the account do not have to be separately reported  In addition to the contact named above, Brian James (Assistant Director), Mark Ryan (Analyst-in-Charge), Ariana Graham, George Guttman, Krista Loose, Daniel Mahoney, Cynthia Saunders, A J  Stephens, and Elwood White made key contributions to this report  Michael John Bechetti, Ted Burik, and Jacqueline Chapin also provided assistance 


Report 2: In accordance with the Improper Payments Information Act of 2002 (IPIA), as amended, and OMB guidance, CMS developed the PERM to estimate the national Medicaid improper payment rate  CMS has other mechanisms to review and assess program integrity risks in state Medicaid managed care programs, and it uses information from the PERM to target its program integrity activities and oversight of states’ Medicaid programs  IPIA requires federal executive branch agencies to, among other things, (1) identify programs and activities that may be susceptible to significant improper payments; and (2), on an annual basis, estimate the amount of improper payments for susceptible programs and activities  Agency heads must produce a statistically valid estimate or an estimate that is otherwise appropriate, using an OMB-approved alternate methodology  Those agencies with programs identified by OMB as being high priority for additional oversight and review are required to submit annual reports to their Inspectors General detailing the actions the agency plans to take to recover improper payments and prevent future improper payments  The Inspector General of each agency submitting such a report is required to review the quality of the improper payment estimates and methodology, among other things  OMB designated Medicaid as a high priority program  In addition, the Improper Payments Elimination and Recovery Act of 2010 requires the Inspector General of each agency to conduct a compliance review to report on the agency’s compliance with several criteria, one of which is that an agency has reported an improper payment rate of less than 10 percent for each program and activity  IPIA also directed OMB to issue guidance for agencies in implementing the IPIA improper payments requirements  Among other things, the OMB guidance requires that agencies review payments made at the point that federal funds are transferred to nonfederal entities and report on the root causes of identified improper payments  To calculate the Medicaid improper payment rate through the PERM, CMS computes an annual rolling average of improper payment rates across all states based on a 17-state, 3-year rotation cycle  In accordance with IPIA, as amended, OMB approved CMS’s PERM methodology, and the HHS-OIG conducts annual compliance reviews  Beginning with its annual improper payment compliance review for fiscal year 2014, the HHS-OIG established a rotating approach to reviewing the estimation methodology for high-priority programs, including Medicaid, that OMB deemed susceptible to improper payments  Due to the number and complexity of the programs, the HHS-OIG methodology reviews are scheduled to be performed over a 4-year period; the PERM estimation methodology will be reviewed as a part of its fiscal year 2017 compliance review  Each of the three components of the Medicaid PERM—FFS, managed care, and eligibility—is estimated differently: The FFS component of the PERM measures errors in a sample of FFS claims, which are records of services provided and the amount the Medicaid program paid for these services  For the majority of sampled FFS claims, the PERM review contractor performs a medical review, which includes a review of the medical documentation to determine errors that do not meet federal and state policies, such as medically unnecessary services, diagnosis coding errors, and policy violations  Any FFS claims that were paid for services that should have been covered under a managed care plan’s capitated payment are also considered errors  The managed care component of the PERM measures errors that occur in the capitated payments that state Medicaid agencies make to managed care organizations (MCO) on behalf of enrollees  Capitated payments are periodic payments approved by CMS that state Medicaid agencies make to contracted MCOs to cover the provision of medical services to enrollees, as well as the MCOs’ administrative expenses and their profits or earnings  The PERM assesses whether any payments made to the MCOs were in amounts different than those the state agency is contractually required to pay, which are approved by CMS  In contrast to the FFS component, the managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data  The eligibility component of the PERM measures errors in state determinations of whether enrollees meet categorical and financial criteria for receipt of benefits under the Medicaid program  The eligibility component assesses determinations for both FFS and managed care enrollees  This component has not been calculated since 2014; instead, CMS piloted different approaches to update the methodologies used to assess enrollee eligibility, as the Patient Protection and Affordable Care Act changed income eligibility requirements for nonelderly, nonpregnant individuals who qualify for Medicaid  Beginning in the 2019 reporting year, eligibility reviews under the PERM will resume and will be conducted by a federal contractor  Medicaid program integrity consists of efforts to ensure that federal and state expenditures are used to deliver quality, necessary care to eligible enrollees, and efforts to prevent fraud, waste, and abuse  We have found in prior work that CMS’s and states’ program integrity efforts focused primarily on payments and services delivered under FFS and did not closely examine program integrity in Medicaid managed care  For Medicaid managed care, CMS has largely delegated program integrity oversight of MCOs to the states  States, in turn, generally oversee MCOs and the providers under contract to MCOs through their contracts with the MCOs and reporting requirements  Some program integrity risks for managed care are similar to those in FFS, including payments made for nonenrolled, ineligible, or deceased individuals; payments to ineligible, excluded, or deceased providers; and payments to providers for improper or false claims, such as payments for services that are not medically necessary  Other program integrity risks are more unique to managed care  For example, capitated payments generally reflect the average cost to provide covered services to enrollees, rather than a specific service  Federal law requires capitation rates to be actuarially sound, meaning that, among other things, they must be reasonably calculated for the populations expected to be covered and for the services expected to be furnished under contract  In order to receive federal funds for its managed care program, a state is required to submit the rates it pays MCOs and the methodology it uses to set those rates to CMS for review and approval  Additionally, federal and state oversight of Medicaid managed care can include ensuring that MCOs fulfill contractual provisions within their managed care contracts  In some cases, these provisions relate directly to program integrity activities, including plans and procedures for identifying, recovering, and reporting on overpayments made to providers  The managed care component of the PERM measures the accuracy of the capitated payments state Medicaid agencies make to MCOs  Specifically, a CMS contractor examines whether the state agency made capitated payments only for eligible enrollees, made capitated payments for the correct amount based on the contract and coverage requirements (time period and geographic location), made capitated payments based on the correct rate for enrollees, and did not make any duplicate payments for enrollees  CMS officials noted that the agency established capitated payments as the level of review, because the capitation rate is the transaction used to determine the federal match in managed care  In general, the federal government matches most state expenditures for Medicaid services on the basis of a statutory formula  In FFS, the federal match is provided for the amount the state pays a health care provider for delivering services to enrollees  With managed care, the federal match is provided for the amount of the capitation rate the state pays the MCO  Capitated payments do not directly relate to the provision of a specific service, but reflect the average cost to provide covered services to enrollees  As a result, CMS officials maintain that the capitated payment is the lowest transaction level at which the agency can clearly identify federal funds without making significant assumptions  Because the managed care component of the PERM review is limited to measuring capitated payments, it does not account for other program integrity risks—such as overpayments to providers and unallowable MCO costs  In addition to errors in capitated payments included in PERM reviews, CMS regulations state that overpayments in managed care include any payment made to an MCO or provider under contract to an MCO to which the MCO or provider is not entitled under Medicaid  Such overpayments included payments for services that were not provided or medically necessary; or to ineligible, excluded, or deceased providers, which are not measured by the PERM  Unallowable MCO costs refers to operating costs that MCOs cannot claim under their managed care contracts, such as certain marketing costs, or that the MCO reported incorrectly  Among the 27 audits and investigations of Medicaid managed care programs we reviewed, 10 identified about $68 million in MCO overpayments to providers and unallowable MCO costs that were not accounted for in PERM estimates  In addition, one investigation of an MCO operating in nine states resulted in a $137 5 million settlement to resolve allegations of false claims  (See app  I for a complete list of the audits and investigations we identified ) However, the full extent of these overpayments and unallowable costs is unknown, because these audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017  Specifically, 24 of the audits and investigations represented reviews in 10 states and, in many cases, focused on individual providers or MCOs; there were about 90 MCOs operating in the 10 states as of September 2017, according to the Kaiser Family Foundation  Some examples of the audits and investigations that identified overpayments and unallowable costs include the following: The Washington State Auditor’s Office found that two MCOs made $17 5 million in overpayments to providers in 2010, which may have increased the state’s 2013 capitation rates  The New York State Comptroller found that two MCOs paid over $6 6 million to excluded and deceased providers from 2011 through 2014  The Massachusetts State Auditor found that one MCO paid $420,000 for health care services and unauthorized prescriptions from excluded providers in 2013 and 2014  The Department of Justice alleged that an MCO operating in several states submitted inflated expenditure information to the state Medicaid agencies, falsified encounter data, and manipulated claims costs and service provision costs in nine states  The MCO agreed to pay over $137 5 million to resolve these claims  The Texas State Auditor’s Office found that an MCO reported $3 8 million in unallowable costs for advertising, company events, gifts, and stock options, along with $34 million in other questionable costs in 2015  The New York State Comptroller also found that an MCO claimed over $260,000 in unallowable administrative expenses, which contributed to an increase in capitation rates across the state  To the extent that the state does not identify or know of MCO overpayments to providers or unallowable MCO costs, the overpayments and unallowable costs could inflate future capitation rates, as the Washington State Auditor and New York State Comptroller noted in their findings  The PERM assesses the accuracy of capitated payments that states make to MCOs  States set capitation rates based on cost data— historical utilization and spending—that MCOs submit to the state Medicaid agencies, but the PERM does not consider these data  Unless removed from these cost data, unidentified overpayments and unallowable costs would likely inflate the MCO cost data that states use to set capitation rates  (See fig  1 ) As a result, future capitation rates would also be inflated, resulting in higher state and federal spending  In fiscal year 2017, the Medicaid managed care improper payment rate was 0 3 percent, while the FFS improper payment rate was 12 9 percent, leading to an assumption that the estimated risks in managed care are less significant than those estimated in FFS  However, the managed care component of the PERM does not determine whether MCO payments to providers were for services that were medically necessary, actually provided, accurately billed and delivered by eligible providers, or whether the MCO costs were allowable and appropriate  As a result, the PERM improper payment estimate potentially understates the extent of program integrity risks in Medicaid managed care  Moreover, this potential understatement in the PERM’s improper payment rate estimate may curtail investigations into the appropriateness of MCO spending  We previously reported that CMS and state program integrity efforts did not closely examine program integrity in Medicaid managed care, focusing primarily on payments and services delivered under FFS  Our current review of the 27 audits we identified encompassed a 5-year period, suggesting that reviews of managed care continue to be limited  An official from a state auditor’s office we spoke with suggested that some states may not audit services delivered under managed care, because of a low improper payment rate  In addition, he noted that his state Medicaid agency used the relatively low payment error rate in managed care as an indicator of few program integrity problems  As noted, CMS has increased its focus on and worked with states to improve oversight of Medicaid managed care; however, these efforts and the oversight efforts of states do not ensure the identification and reporting of overpayments and unallowable costs  In recent years, the agency has sought to strengthen oversight of managed care programs through updated regulations; reviews of states’ managed care programs (Focused Program Integrity Reviews) and collaborative audits, which are conducted jointly by federal program integrity contractors and states; and state monitoring of overpayments  Regulations  In May 2016, CMS updated its regulations for managed care programs in order to strengthen oversight  The updated regulations require a number of additional program integrity activities, such as those listed below  If fully implemented, these updated regulations may help with the identification and removal of overpayments and unallowable costs from data used to set future capitation rates  Under these regulations States must arrange for an independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by MCOs, at least once every 3 years  Through contracts with MCOs, states must require MCOs to have a mechanism through which providers report and return overpayments to the MCOs  States must also require MCOs to promptly report any identified or recovered overpayments—specifying those that are potentially fraudulent—and submit an annual report on recovered overpayments to their state

ground_truth: Concerns over efforts by U.S. taxpayers to use offshore accounts to hide income or evade taxes contributed to the passage of FATCA in 2010, which sought to create greater transparency and accountability over offshore assets held by U.S. taxpayers. House Report 114-624 included a provision for GAO to evaluate FATCA implementation and determine the effects of FATCA on U.S. citizens living abroad. GAO—among other things—(1) assessed IRS's efforts to use FATCA-related information to improve taxpayer compliance; (2) examined the extent to which Treasury administers overlapping reporting requirements on financial assets held overseas; and (3) examined the effects of FATCA implementation unique to U.S. persons living abroad. GAO reviewed applicable documentation; analyzed tax data; and interviewed officials from IRS, other federal agencies and organizations, selected tax practitioners, and more than 20 U.S. persons living overseas. Data quality and management issues have limited the effectiveness of the Internal Revenue Service's (IRS) efforts to improve taxpayer compliance using foreign financial asset data collected under the Foreign Account Tax Compliance Act (FATCA). Specifically, IRS has had difficulties matching the information reported by foreign financial institutions (FFI) with U.S. taxpayers' tax filings due to missing or inaccurate Taxpayer Identification Numbers provided by FFIs. Further, IRS lacks access to consistent and complete data on foreign financial assets and other data reported in tax filings by U.S. persons, in part, because some IRS databases do not store foreign asset data reported from paper filings. IRS has also stopped pursuing a comprehensive plan to leverage FATCA data to improve taxpayer compliance because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns. Ensuring access to consistent and complete data collected from U.S. persons—and employing a plan to leverage such data—would help IRS better leverage such campaigns and increase taxpayer compliance. Due to overlapping statutory reporting requirements, IRS and the Financial Crimes Enforcement Network (FinCEN)—both within the Department of the Treasury (Treasury)—collect duplicative foreign financial account and other asset information from U.S. persons. Consequently, in tax years 2015 and 2016, close to 75 percent of U.S. persons who reported information on foreign accounts and other assets on their tax returns also filed a separate form with FinCEN. The overlapping requirements increase the compliance burden on U.S. persons and add complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Modifying the statutes governing the requirements to allow for the sharing of FATCA information for the prevention and detection of financial crimes would eliminate the need for duplicative reporting. This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding. According to documents GAO reviewed, and focus groups and interviews GAO conducted, FFIs closed some U.S. persons' existing accounts or denied them opportunities to open new accounts after FATCA was enacted due to increased costs, and risks they pose under FATCA reporting requirements. According to Department of State (State) data, annual approvals of renunciations of U.S. citizenship increased from 1,601 to 4,449—or nearly 178 percent—from 2011 through 2016, attributable in part to the difficulties cited above. Treasury previously established joint strategies with State to address challenges U.S. persons faced in accessing foreign financial services. However, it lacks a collaborative mechanism to coordinate efforts with other agencies to address ongoing challenges in accessing such services or obtaining Social Security Numbers. Implementation of a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help federal agencies develop more effective solutions to mitigate such burdens by monitoring and sharing information on such issues, and jointly developing and implementing steps to address them. GAO is making one matter for congressional consideration to address overlap in foreign asset reporting requirements. GAO is making seven recommendations to IRS and other agencies to enhance IRS's ability to leverage FATCA data to enforce compliance, address unnecessary reporting, and better collaborate to mitigate burdens on U.S. persons living abroad. State and Social Security Administration agreed with GAO's recommendations. Treasury and IRS neither agreed nor disagreed with GAO's recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2:  States must use this information when setting actuarially sound capitation rates  Through contracts with MCOs, states must also require MCOs to report specific data, information, and documentation  In addition, the MCO’s chief executive officer or authorized representative must certify the accuracy and completeness of the reported data, information, and documentation  States must enroll MCO providers that are not otherwise enrolled with the state to provide services to enrollees in Medicaid FFS, and revalidate the enrollment at least once every 5 years  Initially this requirement was to start for MCO contracts beginning on July 1, 2018  Subsequently enacted legislation codified this requirement in statute and moved the implementation to January 1, 2018  It is too early to know if these regulations will assure better oversight of MCO payments to providers and the data used to set future capitation rates  The above program integrity requirements only went into effect recently—for contracts starting on or after July 1, 2017, and January 1, 2018  In addition, CMS issued a notice in June 2017 stating that the agency will use its enforcement discretion to assist states that are unable to implement new requirements by the required compliance date  Also, CMS has delayed issuance of implementing guidance for certain provisions until the agency completes its review, a step that may further delay states’ implementation  The agency has designated Medicaid managed care for “deregulatory action” and plans to propose a new rule, but has not indicated which of these provisions, if any, would be revised  Focused Program Integrity Reviews  In fiscal year 2014, CMS implemented its Focused Program Integrity Reviews in order to target high-risk program integrity areas in each state, including managed care  As we previously reported, these focused reviews are narrower in scope than the prior reviews conducted by CMS, but they still involve on-site visits to states  In its focused reviews of managed care, CMS found that several states had incomplete oversight of MCO payments to providers, even though the agency relies on states to verify reported MCO overpayments and to ensure the overpayments are excluded from the data used to set capitation rates  In the 27 focused reviews of managed care from 2014 to 2017, CMS found that MCOs in 17 states reported fewer overpayments to their state Medicaid agencies than CMS would expect  For example, MCOs in at least 5 states reported that overpayments were less than 0 1 percent of their total managed care expenditures; while CMS noted in 1 focused review that overpayments typically equal 1 to 10 percent of total expenditures in managed care  CMS also found that 5 of the 27 states did not verify that MCOs excluded overpayments from these data, and 1 state did not exclude overpayments from the capitation rate setting  This is consistent with our March 2017 report in which we noted that CMS commonly found that MCOs reported low amounts of recovered overpayments and conducted few reviews to identify overpayments  Also, officials from three of the five states we interviewed for that report said the focused reviews gave them leverage in dealing with MCOs or led MCOs to focus more on program integrity  We also reported that CMS officials recommended states take steps to improve their oversight of MCOs, based on the focused review findings  The findings from CMS’s focused reviews of managed care also highlight the need for greater federal oversight of states  Without these reviews, it is unclear if states would independently identify MCOs’ reporting of overpayments or work to strengthen MCO reporting  Yet, CMS has not yet published the focused reviews of managed care in 13 states, and it may only conduct a focused review in a state once every three or more years  Given CMS’s timeline for the focused reviews, it may take years to determine if corrective actions result in improved program integrity in services delivered through managed care  Collaborative audits  CMS has expanded the federal-state collaborative audits beyond FFS, and has begun to engage states to participate in collaborative audits of MCOs and providers under contract to MCOs  As a part of the collaborative audit process, the state volunteers to jointly develop the audit processes the federal contractors follow  CMS officials told us that federal contractors have completed 14 collaborative audits of providers under contract to MCOs in three states—Arizona, the District of Columbia, and Tennessee  Only the audit of Trusted Healthcare, an MCO in the District of Columbia, has been published  That audit identified $129,000 in overpayments in a sample of MCO payments to providers, which, if generalized to all of the MCO’s payments over 6 months, would equate to over $4 million in overpayments  According to CMS, three additional states—Louisiana, Nebraska, and New Hampshire—have shown interest in collaborative audits of their MCOs, although such audits require states to prepare data files for the federal contractor and commit staff time  In our March 2017 report, we found that states’ participation in FFS collaborative audits varied and some states reported barriers to their participation  Expanding collaborative audits in managed care will require commitment from and coordination with states  State monitoring of overpayments in managed care  States are required to report overpayments they have identified and recouped along with state expenditures on a quarterly basis  However, based on the responses of the program integrity officials in 13 of the 16 states we contacted, most officials were unable to define the magnitude of overpayments in their managed care programs, which may signify a need for greater federal oversight or coordination  Specifically, officials in 7 of the 13 states could not or did not identify the share of total reported Medicaid overpayments that occurred in managed care  In 11 of the 13 states, officials responded that they did not directly monitor MCO payments to providers  Of those 11 states, officials in 4 said they depend on MCOs to report overpayments and exclude the overpayments from the data used to set capitation rates  As long as states are not taking action to identify overpayments in managed care, they cannot be assured that they are accurately paying MCOs for medically necessary services provided to enrollees  Federal internal control standards call for agency management to identify, analyze, and respond to risks  CMS has taken some steps to identify, analyze, and respond to risks through its regulations, Focused Program Integrity Reviews, and collaborative audits  However, key CMS and state oversight efforts fall short of mitigating the limitations of the PERM estimates of improper payments for managed care, because they do not ensure the identification and reporting of overpayments to providers and unallowable MCO costs  Without addressing these key risks, CMS and states cannot ensure the integrity of Medicaid managed care programs  The 0 3 percent improper payment rate for Medicaid managed care, as measured by the PERM, is significantly lower than the improper payment rate of 12 9 percent for Medicaid FFS  However, this difference does not signal better oversight; rather, it represents differences in the review criteria between FFS and managed care, which result in a less complete accounting for the program integrity risks in managed care  The PERM does not account for key program integrity risks in Medicaid managed care: specifically, unidentified overpayments and unallowable costs  One federal investigation of an MCO operating in nine states resulted in a settlement of $137 5 million to resolve allegations of false claims that were not captured in the national Medicaid improper payment rate estimate  Further, CMS found that MCOs and states do not provide sufficient oversight in Medicaid managed care to address the risks that are not accounted for in the PERM, findings that are reinforced by our reports on Medicaid managed care program integrity  CMS has taken steps to improve its oversight of Medicaid managed care, yet these efforts fall short of ensuring that the agency and states will be able to identify and address overpayments to providers and unallowable MCO costs  Without better measurement of program risks—particularly as expenditures for Medicaid managed care continue to grow—CMS cannot be certain that the low improper payment rate for managed care, as measured by the PERM, accurately reflects lower risks in managed care  The Administrator of CMS should consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care  (Recommendation 1) We provided a draft of this report to the Department of Health and Human Services (HHS) for comment  In its written comments, HHS concurred with our recommendation, and indicated that it will review regulatory authority and audit resources to determine the best way to account for Medicaid program risks that are not accounted for in the PERM  However, HHS stated that the PERM is not intended to measure all Medicaid program integrity risks, and utilizing the PERM measurement in that way would be a misunderstanding and misuse of the reported rate  HHS also commented that a review of payments from MCOs to providers is outside the scope of IPIA  In addition, HHS asserted that including such a review would diminish the value of PERM reporting—because it would require significant assumptions about the amount of federal share in MCO payments to providers  Further, HHS maintained that such a review also would result in a measurement that was not comparable to other programs or agencies, which would diminish the value of government- wide improper payment rate reporting  We acknowledge that the current PERM methodology has been approved by OMB  However, we maintain that the PERM likely underestimates program integrity risks in Medicaid managed care  To ensure the appropriate targeting of program integrity activities, CMS needs better information about these risks  Given the size of the Medicaid program, its vulnerability to improper payments, and the growth in managed care, it is critical to have a full accounting of program integrity risks in managed care in order to best ensure the integrity of the whole Medicaid program  In its written comments, HHS also summarized several activities it uses to oversee and support states’ Medicaid program integrity efforts, including state program integrity reviews; collaborative audits conducted by federal contractors; Medicaid Integrity Institute training for state employees; and the Medicaid Provider Enrollment Compendium  HHS also provided technical comments, which we incorporated as appropriate  HHS’s comments are reprinted in appendix II  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of CMS, appropriate congressional committees, and other interested parties  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or at yocomc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff that made key contributions to this report are listed in appendix III  We reviewed 16 federal and state audits and 11 notices of investigations of Medicaid managed care organizations (MCO) and providers issued from January 2012 to September 2017  As the findings below show, the audits and investigations represent a limited number of reviews that, in many cases, focused on individual states and individual providers or MCOs within that state  Given the limited scope and number of states reviewed, the amount of the overpayments and unallowable costs occurring nationwide is unknown  These audits and investigations show cases of MCO overpayments to providers or unallowable costs, which are not accounted for by the Centers for Medicare & Medicaid Services’ Payment Error Rate Measurement (PERM) ; errors in capitated payments (e g , capitated payments made for deceased individuals), which are accounted for in the PERM; and gaps in managed care oversight  When reporting overpayments and unallowable costs identified in the audits and investigations, we only include amounts specifically attributed to MCOs in our total  This total does not include the following: overpayments and unallowable costs identified in those audits and investigations that did not distinguish between the amounts attributable to MCOs, Medicaid fee-for-service, or Medicare; overpayments and unallowable costs identified in criminal proceedings that are not yet resolved; and errors in capitated payments, as those payments would be reviewed by the PERM  As a result, the total amount of overpayments and unallowable costs and capitated payment errors in this appendix exceed what we report  In addition to the contact named above, Leslie V  Gordon (Assistant Director), Pauline Adams (Analyst-in-Charge), Erika Huber, and Drew Long made key contributions to this report  Also contributing were Muriel Brown and Jennifer Whitworth 
Report 2:  We found the COBRA model to be a generally reasonable estimator for comparing potential costs and savings among alternatives  (See fig  3 ) As with any model, the quality of the output from COBRA was a direct function of the data DOD included in the model  Also, DOD’s COBRA model relied to a large extent on standard factors and averages and did not represent budget quality estimates that were developed once BRAC decisions were made and detailed implementation plans were developed  Nonetheless, the financial information provided important input into the selection process as decision makers weighed the financial implications—along with military value criteria and other considerations—in arriving at final decisions about the suitability of various closure and realignment options  Establish an organizational structure  The Office of the Secretary of Defense emphasized the need for joint cross-service groups to analyze common business-oriented functions  For the 2005 BRAC round, as for the 1993 and 1995 rounds, these joint cross-service groups performed analyses and developed closure and realignment options in addition to those developed by the military departments  Our evaluation of DOD’s 1995 BRAC round found that few cross- service recommendations were made, in part because of the lack of high-level leadership to encourage consolidations across the departments’ functions  In the 1995 BRAC round, the joint cross- service groups submitted options through the military services for approval, but few were approved  The number of approved recommendations that the joint cross-service groups developed significantly increased in the 2005 BRAC round  This increase was, in part, because high-level leadership ensured that the options were approved not by the military departments but rather by a DOD senior- level group, known as the Infrastructure Steering Group  As shown in figure 4, the Infrastructure Steering Group was placed organizationally on par with the military departments  Establish a common analytical framework  To ensure that the selection criteria were consistently applied, the Office of the Secretary of Defense, the military departments, and the seven joint cross- service groups first performed a capacity analysis of facilities and functions  Before developing the candidate recommendations, DOD’s capacity analysis relied on data calls to hundreds of locations to obtain certified data to assess such factors as maximum potential capacity, current capacity, current usage, and excess capacity  Then, the military departments and joint cross-service groups performed a military value analysis for the facilities and functions based on primary military value criteria, which included a facility’s or function’s current and future mission capabilities, physical condition, ability to accommodate future needs, and cost of operations  Develop BRAC oversight mechanisms to improve accountability for implementation  In the 2005 BRAC round, the Office of the Secretary of Defense for the first time required the military departments to develop business plans to better inform the Office of the Secretary of Defense of the status of implementation and financial details for each of the BRAC 2005 recommendations  These business plans included: (1) information such as a listing of all actions needed to implement each recommendation; (2) schedules for personnel relocations between installations; and (3) updated cost and savings estimates by DOD based on current information  This approach permitted senior-level intervention if warranted to ensure completion of the BRAC recommendations by the statutory completion date  Involve the audit community to better ensure data accuracy  The DOD Inspector General and military department audit agencies played key roles in identifying data limitations, pointing out needed corrections, and improving the accuracy of the data used in the process  In their oversight roles, the audit organizations, which had access to relevant information and officials as the process evolved, helped to improve the accuracy of the data used in the BRAC process and thus strengthened the quality and integrity of the data used to develop closure and realignment recommendations  For example, the auditors worked to ensure certified information was used for BRAC analysis and reviewed other facets of the process, including the various internal control plans, the COBRA model, and other modeling and analytical tools that were used in the development of recommendations  We identified two key challenges that affected DOD’s implementation of BRAC 2005 and would need to be addressed for VA to adopt a BRAC- like process for its asset and infrastructure review  Some transformational-type BRAC recommendations required sustained senior leadership attention and a high level of coordination among many stakeholders to complete by the required date  Implementation of some transformational BRAC recommendations—especially those where a multitude of organizations had roles to play to ensure the achievement of the goals of the recommendation—illustrated the need to involve key stakeholders and effective planning  For example, the Defense Logistics Agency committed sustained high-level leadership and included relevant stakeholders to address implementation challenges faced with the potential for disruptions to depot operations during implementation of the BRAC consolidation recommendation  To implement the BRAC recommendations, the agency had to develop strategic agreements with the services that ensured that all stakeholders agreed on its plans for implementation, and had to address certain human capital and information technology challenges  Large number of actions and interdependent recommendations complicated the implementation process  The large number and variety of BRAC actions presented challenges during implementation  The BRAC 2005 round had more individual actions (813) than the four prior rounds combined (387)  The executive staff of the Commission told us that it was more difficult to assess the costs and the amount of time for the savings to offset the implementation costs since many of the recommendations contained multiple interdependent actions, all of which needed to be reviewed  Specifically, many of the BRAC 2005 recommendations were interdependent and had to be completed in a sequential fashion within the statutory implementation period  In cases where interdependent recommendations required multiple relocations of large numbers of personnel, delays in completing one BRAC recommendation had a cascading effect on the implementation of other recommendations  Specifically, DOD had to synchronize the relocations of over 123,000 people with about $24 7 billion in new construction or renovation  Commission officials told us that in prior BRAC rounds each base was handled by a single integrated recommendation  However, in BRAC 2005, many installations were simultaneously affected by multiple interconnected BRAC recommendations  Given the complexity of interdependent recommendations, the Office of the Secretary of Defense required the military departments and defense agencies to provide periodic updates on implementation challenges and progress  Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes our prepared statement  We are happy to answer any questions related to our work on VA’s efforts to align its medical facilities and services or on DOD’s BRAC process  If you or your staff members have any questions concerning this testimony, please contact David Wise at (202) 512-2834 or wised@gao gov regarding federal real property, or Brian Lepore at (202) 512-4523 or leporeb@gao gov regarding the BRAC process  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  Other individuals who made key contributions to this testimony include Keith Cunningham, Assistant Director; Gina Hoffman, Assistant Director; Tracy Barnes; Jeff Mayhew; Kevin Newak; Richard Powelson; Malika Rice; Jodie Sandel; Eric Schwab; Amelia M  Weathers; and Crystal Wesco  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: The improper payment rate is a sentinel measure of program integrity risks for the Medicaid program. CMS and the states oversee Medicaid, whose size, structure, and diversity make it vulnerable to improper payments. CMS estimates the Medicaid improper payment rate annually through its PERM, which includes an estimate for Medicaid managed care, in which states contract with MCOs to provide services to Medicaid enrollees. GAO was asked to study the PERM methodology for managed care. In this report, GAO examined the extent to which the PERM accounts for program integrity risks in Medicaid managed care, including CMS's and states' oversight. GAO identified program integrity risks reported in 27 federal and state audits and investigations issued between January 2012 and September 2017; reviewed federal regulations and guidance on the PERM and CMS's Focused Program Integrity Reviews; and contacted program integrity officials in the 16 states with a majority of 2016 Medicaid spending for managed care, as well as CMS officials and program integrity experts. The Centers for Medicare & Medicaid Services' (CMS) estimate of improper payments for Medicaid managed care has limitations that are not mitigated by the agency's and states' current oversight efforts. One component of the Payment Error Rate Measurement (PERM) measures the accuracy of capitated payments, which are periodic payments that state Medicaid agencies make to managed care organizations (MCO) to provide services to enrollees and to cover other allowable costs, such as administrative expenses. However, the managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data. Further, GAO's review of the 27 federal and state audits and investigations identified key program risks. Ten of the 27 federal and state audits and investigations identified about $68 million in overpayments and unallowable MCO costs that were not accounted for by PERM estimates; another of these investigations resulted in a $137.5 million settlement. These audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017. To the extent that overpayments and unallowable costs are unidentified and not removed from the cost data used to set capitation rates, they may allow inflated MCO payments and minimize the appearance of program risks in Medicaid managed care. CMS and states have taken steps to improve oversight of Medicaid managed care through updated regulations, focused reviews of states' managed care programs, and federal program integrity contractors' audits of managed care services. However, some of these efforts went into effect only recently, and others are unlikely to address the risks in managed care across all states. Furthermore, these efforts do not ensure the identification and reporting of overpayments to providers and unallowable costs by MCOs. Federal internal control standards call for agency management to identify and respond to risks. Without addressing key risks, such as the extent of overpayments and unallowable costs, CMS cannot be certain that its estimated improper payment rate for managed care (0.3 percent compared with 12.9 percent in Medicaid fee-for-service) accurately reflects program risks. The Administrator of CMS should consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care. HHS concurred with this recommendation. HHS also provided technical comments, which were incorporated as appropriate.