GAO-07-533R Improper Payments 

United States Government Accountability Office

Washington, DC 20548 

Comptroller General

of the United States

February 27, 2007 

The Honorable Thomas R. Carper 

Chairman 

The Honorable Tom Coburn 

Ranking Member 

Subcommittee on Federal Financial Management, 

 Government Information, Federal Services, 

 and International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

Subject: Improper Payments: Posthearing Responses on a 

 December 5, 2006, Hearing to Assess the Improper Payments 

 Information Act of 2002 

On December 5, 2006, we testified1

 before your subcommittee at a hearing entitled, 

“An Assessment of Improper Payments Information Act of 2002.” At the end of the 

hearing, the subcommittee asked us to provide information regarding (1) barriers 

inhibiting agencies’ efforts to prevent and reduce improper payments, (2) legislative 

reforms needed to facilitate agencies’ efforts to prevent improper payments, and 

(3) suggested language to amend the Improper Payments Information Act of 2002 

(IPIA) that would provide more complete disclosure and transparency of agencies’ 

improper payments reporting. 

First, we identified several key barriers that agencies encounter in their quest to 

reduce improper payments, such as the inability to share data and restrictions in the 

program’s administration. In some cases, legislation limits the type of information 

that can be shared among agencies to verify data provided by applicants for 

government programs or benefits or to make eligibility decisions. For example, we 

reported2

 in November 2006 that the Department of Education reported that section 

6103 of the Internal Revenue Code concerning confidentiality of the tax return 

information precludes data matching. We also reported3

 in October 2005 that the 

United States Citizenship and Immigration Services, a component of the Department 

 

1

GAO, Improper Payments: Incomplete Reporting under the Improper Payments Information Act 

Masks the Extent of the Problem, GAO-07-254T (Washington, D.C.: Dec. 5, 2006). 2

GAO, Improper Payments: Agencies’ Fiscal Year 2005 Reporting under the Improper Payments 

Information Act Remains Incomplete, GAO-07-92 (Washington, D.C.: Nov. 14, 2006). 3

GAO, Taxpayer Information: Options Exist to Enable Data Sharing Between IRS and USCIS but 

Each Presents Challenges, GAO-06-100 (Washington, D.C.: Oct. 11, 2005). 
of Homeland Security (DHS) reported that it was not authorized to receive taxpayer 

information from the Internal Revenue Service (IRS) directly to determine eligibility 

for immigration benefits. Barriers related to program administration involve some 

aspect of an agency’s current program structure that limits its actions to prevent or 

reduce improper payments. However, the agency can take steps to modify current 

program operations to help prevent improper payments. For example, we 

recommended4

 in June 2006 that DHS enter into an agreement with other agencies, 

such as the Social Security Administration, to periodically authenticate information 

contained in the Individuals and Households Program registrations to prevent 

individuals from applying for assistance using Social Security numbers that were 

never issued or belonged to deceased or other individuals. 

 

Second, regarding legislative reforms, the Budgets of the U.S. Government for Fiscal 

Years 2008 and 2007 include proposed actions to facilitate better measurement and 

detection of improper payments. We continue to support the administration’s 

proposed legislative reforms that assist agency action to reduce improper payments, 

such as imposing penalties for fraud, improving benefit coordination between 

agencies, and simplifying eligibility requirements. Specifically, since fiscal year 2000, 

our recommendations have been aimed at raising the level of attention given to 

improper payments, including annually estimating, reporting, and reducing improper 

payments for agencies’ programs. Our work on governmentwide improper payments 

and issuance of our executive guide on strategies to manage improper payments5

 led 

to the passage of IPIA. The act requires that executive branch agency heads identify 

programs and activities susceptible to significant improper payments, estimate 

amounts improperly paid, and annually report improper payment estimates and 

actions to reduce them. 

For example, the Budget of the U.S. Government for Fiscal Year 2008 includes 

legislative reforms related to the Department of the Treasury’s Earned Income Tax 

Credit (EITC) and Child Tax Credit programs, which are intended to clarify the 

uniform definition of child, simplify the EITC eligibility rules, and reduce the 

computation complexity of the refundable Child Tax Credit. According to the Office 

of Management and Budget (OMB), if enacted, the proposal would save $392 million 

in the first year and $6.5 billion over 10 years.6

 We have raised similar issues 

regarding the complexity of the EITC program in previous reports and testimonies7

and since 1995, have designated the EITC program as a high-risk area. In our January 

2007 high-risk series update,8

 we reported that the IRS and the Congress will need to 

 4

GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA’s Control 

Weaknesses Exposed the Government to Significant Fraud and Abuse, GAO-06-655 (Washington,

D.C.: June 16, 2006). 5

GAO, Strategies to Manage Improper Payments: Learning From Public and Private Sector 

Organizations, GAO-02-69G (Washington, D.C.: October 2001). 6

We have not independently assessed OMB’s proposed legislative reforms and related projected

savings included in the Budgets of the U.S. Government for Fiscal Years 2008 and 2007. 7

GAO, Tax Gap: Multiple Strategies, Better Compliance Data, and Long-Term Goals Are Needed to 

Improve Taxpayer Compliance, GAO-06-208T (Washington, D.C.: Oct. 26, 2005), and Tax Compliance: 

Better Compliance Data and Long-term Goals Would Support a More Strategic IRS Approach to 

Reducing the Tax Gap, GAO-05-753 (Washington, D.C.: July 18, 2005). 8

GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). 

Page 2 GAO-07-533R Improper Payments 
develop and IRS will need to execute multiple strategies over a sustained period, 

including simplifying the tax code or specific code sections. 

Lastly, we reported9

 in November 2006 that OMB’s broad implementationof IPIA’s 

general criteria to identify risk-susceptible programs limits the disclosure and 

transparency of governmentwide improper payments. This limitation does not further 

the objectives of IPIA, as programs that do not meet OMB’s criteria of exceeding 

$10 million and 2.5 percent of program payments are excluded from agencies’ 

improper payment reporting. For example, one agency identified three programs with 

estimated improper payments exceeding $10 million, but because the estimates did 

not exceed 2.5 percent of program outlays, they were not included in the 

governmentwide improper payments total. In our November 2006 report, we 

recommended that the Congress consider amending existing IPIA provisions to 

define specific criteria, such as a minimum dollar threshold, agencies should use to 

identify which programs and activities are susceptible to significant improper 

payments. The enclosure includes our suggested language for amending IPIA for 

better transparency and disclosure of improper payments reporting. 

- - - - - - 

This report is available on GAO’s Web site at http://www.gao.gov. Should you have 

any questions on matters discussed in this report or need additional information, 

please contact McCoy Williams, Director, at (202) 512-9095 or williamsm1@gao.gov. 

Contact points for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. Major contributors to this report are Carla 

Lewis, Assistant Director; Donell Ries; and Chris Rodriguez. 

David M. Walker 

Comptroller General 

of the United States 

Enclosure 

 9

GAO-07-92. 

Page 3 GAO-07-533R Improper Payments 
Enclosure 

DRAFT BILL LANGUAGE TO AMEND 

THE IMPROPER PAYMENTS INFORMATION ACT 

Sec. _____. Subsection (d) of section 2 of Public Law 107-300 (31 U.S.C. § 3321 note) 

is amended by inserting after paragraph (3) the following new paragraph: 

“(4) SIGNIFICANT.---- For purposes of subsection (a), the term “significant” 

means annual improper payments under a program or activity that exceed 

$10 million.” 

DRAFT REPORT LANGUAGE 

The Improper Payments Information Act of 2002 (IPIA) states that agency heads must 

review their agencies’ programs and activities to determine those that are susceptible 

to significant improper payments. The law does not currently define what programs 

or activities are susceptible to significant improper payments. In its implementing 

guidance, OMB directed that a program or activity is susceptible to significant 

improper payments if it meets two criteria—potential improper payments exceeding 

$10 million and 2.5 percent of program payments. Therefore, both criteria must be 

met for an agency to subject the program to the later steps requiring the agency to 

estimate improper payments and address the various improper payment reporting 

requirements. Using OMB’s criteria could materially affect the extent to which

agencies report improper payment information in their performance and 

accountability reports. This section would amend IPIA to define, for purposes of 

identifying what programs or activities are susceptible to improper payments, the 

term “significant” to mean “annual improper payments under a program or activity 

that exceed $10 million.” This amendment will result in more complete disclosure and 

transparency of governmentwide improper payment reporting. 

 

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Page 4 GAO-07-533R Improper Payments 
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