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THE IMPROPER PAYMENTS INFORMATION ACT—

ARE AGENCIES MEETING THE REQUIREMENTS

OF THE LAW?

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

FINANCE, AND ACCOUNTABILITY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 5, 2006

Serial No. 109–252

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, FINANCE, AND ACCOUNTABILITY

TODD RUSSELL PLATTS, Pennsylvania, Chairman

VIRGINIA FOXX, North Carolina

TOM DAVIS, Virginia

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

EDOLPHUS TOWNS, New York

MAJOR R. OWENS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

EX OFFICIO

HENRY A. WAXMAN, CALIFORNIA

MIKE HETTINGER, Staff Director

TABETHA MUELLER, Professional Staff Member

ERIN PHILLIPS, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on April 5, 2006 ................................................................................ 1

Statement of:

Combs, Linda M., Controller, Office of Federal Financial Management,

Office of Management and Budget; Charles Johnson, Assistant Secretary for Budget, Technology, and Finance, U.S. Department of Health

and Human Services, accompanied by Timothy B. Hill, Chief Financial

Officer and Director, Office of Financial Management, Centers for

Medicare and Medicaid Services; and McCoy Williams, Director, Financial Management and Assurance, U.S. Government Accountability Office .................................................................................................................. 7

Combs, Linda M. ....................................................................................... 7

Johnson, Charles ....................................................................................... 14

Williams, McCoy ........................................................................................ 34

Letters, statements, etc., submitted for the record by:

Combs, Linda M., Controller, Office of Federal Financial Management,

Office of Management and Budget, prepared statement of ....................... 9

Johnson, Charles, Assistant Secretary for Budget, Technology, and Finance, U.S. Department of Health and Human Services, prepared

statement of ................................................................................................... 16

Platts, Hon. Todd Russell, a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 3

Towns, Hon. Edolphus, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 5

Williams, McCoy, Director, Financial Management and Assurance, U.S.

Government Accountability Office, prepared statement of ....................... 36

(1)

THE IMPROPER PAYMENTS INFORMATION

ACT—ARE AGENCIES MEETING THE REQUIREMENTS OF THE LAW?

WEDNESDAY, APRIL 5, 2006

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

FINANCE, AND ACCOUNTABILITY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:04 p.m., in room

2247, Rayburn House Office Building, Hon. Todd Russell Platts

(chairman of the subcommittee) presiding.

Present: Representatives Platts, Duncan, and Maloney.

Staff present: Mike Hettinger, staff director; Dan Daly, counsel;

Tabetha Mueller, professional staff member; Erin Phillips, clerk;

Adam Bordes, minority professional staff member; and Jean Gosa,

minority assistant clerk.

Mr. PLATTS. A quorum being present, this hearing of the Government Reform Subcommittee on Government Management, Finance,

and Accountability will come to order.

Congress has a responsibility to ensure that tax dollars are spent

in the most effective manner possible and for their intended purpose. Unfortunately, as we will hear today, billions of dollars continue to be lost due to improper payments—any payment that

should not have been made.

This administration and Congress have made the reduction of

improper payments a top priority. In support of this goal, this subcommittee believes that taxpayers have a fundamental right to

know how their tax dollars are being spent. In 2002, my esteemed

former colleague, Congressman Steve Horn, who served as chairman of this subcommittee, was successful in securing the enactment of the Improper Payments Information Act of 2002. This law

has helped bring to the forefront the need to address this issue

more aggressively.

The work of the past few years has brought us a long way to getting our arms around the extent of this problem. What we know

today is that a primary cause of these mistakes, which occur

throughout Government, is the lack of adequate internal financial

controls and business process systems. Some agencies have employed new technologies, such as data mining and electronic benefits transfer, with great success in helping to reduce their error

rates. More can and must be done. This subcommittee will continue

to conduct aggressive oversight on this important topic.

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Today we will have from the Honorable Dr. Linda Combs, Controller in the Office of Federal Financial Management at the Office

of Management and Budget. Dr. Combs, we again thank you for

being with us. As in the past, we certainly appreciate your knowledge and wisdom that you bring to the committee.

Ms. COMBS. Thank you, Mr. Chairman.

Mr. PLATTS. We will also be joined by Mr. Charles Johnson of the

Department of Health and Human Services, who is accompanied by

Mr. Tim Hill, Chief Financial Officer at the Center for Medicare

and Medicaid Services. We appreciate both of you being with us as

well and look forward to your testimony. And we are joined finally

by McCoy Williams, a regular here at the subcommittee. Mr. Williams, we appreciate you being with us and, again, the expertise

and knowledge you bring to the subcommittee.

Mr. WILLIAMS. Thank you, Mr. Chairman.

[The prepared statement of Hon. Todd Russell Platts follows:]

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Mr. PLATTS. We will proceed with opening statements and then

get into your statements, and we appreciate the written testimonies you have provided, and if you want to summarize that here

today, then we will get into questions and answers.

The gentleman from Tennessee, did you have a statement you

would like to begin with?

Mr. DUNCAN. Yes, Mr. Chairman. Thank you very much. Very

briefly, I will just say that, you know, the work of this Subcommittee on Government Management, Finance, and Accountability, I

guess it is not the most dramatic or colorful or high-profile, but it

is certainly extremely important, particularly, as we all know,

when we have a national debt of well over $8 trillion and now we

have raised the debt limit to $9 trillion because we know we are

headed very quickly to that level.

So I think this work is very, very important, and I appreciate the

seriousness and diligence with which you do your duties, Mr.

Chairman, and I specifically remember the hearing that you had

on this same legislation a year or so ago. And, in fact, we all represent about 700,000 people, but I send out a newsletter a couple

of times a year to the 285,000-odd addresses in my district. And

I wrote about this hearing as one of the topics, one of the many

topics that I covered in that newsletter.

We heard some pretty amazing, pretty startling information in

the hearing last year, and I am pleased that you have called another hearing, and I look forward to hearing the testimony to see

what progress has been made since that point.

Thank you very much.

Mr. PLATTS. Thank you, Mr. Duncan, and we always appreciate

and welcome your participation and your great leadership on financial accountability as well.

Mr. DUNCAN. Thank you.

[The prepared statement of Hon. Edolphus Towns follows:]

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Mr. PLATTS. We will proceed to our witnesses. The practice of the

committee, if we could swear each of you in before your testimonies

and any others that will be advising you as part of your testimonies here today. If you would like to rise and raise your right

hands?

[Witnesses sworn.]

Mr. PLATTS. Thank you. You may be seated. The clerk will note

that all the witnesses have affirmed the oath, and, Dr. Combs, we

will begin with you, if you would like to proceed.

STATEMENTS OF LINDA M. COMBS, CONTROLLER, OFFICE OF

FEDERAL FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; CHARLES JOHNSON, ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY, AND FINANCE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, ACCOMPANIED BY TIMOTHY B. HILL, CHIEF FINANCIAL OFFICER

AND DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES; AND McCOY

WILLIAMS, DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

STATEMENT OF LINDA M. COMBS

Ms. COMBS. Thank you, Chairman Platts, Congressman Towns,

and members of this committee. I am certainly pleased to be here

today to discuss the administration’s efforts to improve the accuracy and integrity of Federal payments. As a reflection of how important the effective and efficient stewardship of taxpayer dollars

is, the President has made the elimination of improper payments

one of his highest management priorities. I appreciate the opportunity we have today to share some recent success stories on agency efforts, to discuss steps we are taking to address ongoing challenges, and to provide you with the highlights from OMB’s second

annual report on governmentwide improper payments.

During fiscal year 2005, the Federal Government made substantial progress in meeting the President’s goal to eliminate improper

payments. Most significantly, the governmentwide improper payment total reported for fiscal year 2004 decreased from $45.1 billion to $37.3 billion, a reduction of approximately $7.8 billion, or

17 percent.

Notable accomplishments from this past year include: Medicare’s

reported improper payments decreased by more than $9 billion, or

44 percent.

The U.S. Department of Agriculture reported an error rate of less

than 6 percent in the food stamp program, which is the lowest

error rate in the program’s history.

The Department of Labor reduced improper Unemployment Insurance payments by approximately $600 million in fiscal year

2005. This represents a greater than 15-percent decrease in the

level of improper payments for this particular program since last

year’s reporting.

The Department of Housing and Urban Development has reduced improper payments in this program by more than $1.8 billion since 2000.

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Although several important programs such as the Earned Income

Tax Credit and Old-Age and Survivors Disability Insurance reported increases in 2005, the governmentwide improper payment

total is continuing to trend significantly downward.

Our CFOs are working together with program officials to leverage new technologies and generate more cost-efficient methods for

measuring and eliminating improper payments.

Another critical accomplishment in fiscal year 2005 was that

Federal agencies reported error measurements on an additional 17

programs.

We have an error measurement in place for approximately 85

percent of all payments deemed risk susceptible by Federal agencies. Although we are proud of this result, we are not satisfied with

it.

Also of note, and in direct response to suggestions made by this

subcommittee at a previous hearing, agency reporting on improper

payments to vendors is now included in our governmentwide reporting, providing a more complete picture on governmentwide improper payments. Specifically, Federal agencies reviewed $365 billion in vendor payments in fiscal year 2005. They identified $557 million in improper payments, of which $467 million, or 84 percent, has been recovered to date.

Because 95 percent of the reported improper payment total continues to reside within seven programs, the first seven that we

identified in 2004, OMB continues to focus on these particular

agencies.

Finally, the administration continues to pursue an aggressive

legislative agenda in the improper payments arena with a series of

program, with a series of program integrity reforms included in the

President’s 2007 budget.

With the tools of the Improper Payments Act and this administration’s management initiatives hand in hand in effect, the Federal Government is in a strong position to build on the dramatic

reduction in improper payments achieved this year and to ensure

that an error measurement is provided for all high-risk programs.

With the goal of ensuring that each taxpayer dollar is spent wisely,

efficiently, and for the purpose for which it was originally intended,

we remain committed to eliminating Federal improper payments.

We look forward to continuing to work with you and this subcommittee and Congress to see that this objective is accomplished.

Thank you, Mr. Chairman, for the opportunity to speak before

you today. I am pleased to address any questions.

[The prepared statement of Ms. Combs follows:]

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Mr. PLATTS. Thank you, Dr. Combs.

Secretary Johnson.

STATEMENT OF CHARLES JOHNSON

Mr. JOHNSON. Chairman Platts, Mr. Duncan, other members of

the committee, I am delighted to be with you today. Thank you for

the invitation. I am pleased to have Mr. Tim Hill adjacent to me.

He is with the Centers for Medicare and Medicaid Services.

I have only been at Health and Human Services less than 1 year,

but I spent considerable time looking at improper payments because of my strong belief that we have a genuine responsibility to

the American taxpayer to protect their dollars.

Although more must be done, I am very pleased with what has

already been accomplished at Health and Human Services. let me

review our seven improper payment programs to give you a status

report, starting with our largest program, Medicare.

The Department has been testing error rates in Medicare for 10

years, going back to 1996. In my judgment, we have a mature, sophisticated program that is a model for the rest of the programs

in our Department.

In fiscal year 2005, we reported a Medicare fee-for-service error

rate of 5.2 percent. That is a significant reduction from the 10.1

percent reported in the prior year. Now, this significant reduction

can be attributed to the aggressive actions that we have taken to

require adequate documentation. This does not necessarily translate into savings in the traditional sense, but no entity in the world

should make payments without adequate documentation.

Significant error rate reductions from this point will be more difficult to achieve, but we intend to remain aggressive. Beginning

this year, HHS will produce error rates twice a year. This increased availability of data will help not only us by our contractors

to better target efforts to reduce payment errors. We have also

adopted more incentives for contractors to eliminate improper payments.

Let me talk about the State Children’s Health Insurance Program and Medicaid together.

In Medicaid, we have used a number of different pilots and demonstration projects to eliminate improper payments for this Stateoperated program. Much was learned from these projects, and

there is evidence that we have had a reduction in improper payments where those measures were used. Whereas, Medicare is a

single, consistent Federal program, by design each State runs its

Medicaid program differently. After much review, the Department

made a wise decision. We have concluded that we have a successful

methodology in Medicare, and if we replicate that 50 times, we can

achieve the same success in 50 States.

We are now launched on a Medicaid error rate program that is

certain to be successful because it is proven. Now, this has caused

us some delay in our originally intended reporting dates, but it will

prove to be worth it. In the meantime, we will have interim data

that will be useful to HHS and to this committee.

In 2006, contractors will measure national Medicaid error rates

in 17 States, and by the end of fiscal year 2008, all 50 States and

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the District of Columbia will be covered for both Medicaid and

SCHIP.

Let me cover the rest of the programs.

Head Start: Under Head Start legislation, grantees are required

to be monitored at least once every 3 years. We reported the Head

Start payment error rate reduction from 3.9 percent in fiscal year

2004 to 1.6 percent in fiscal year 2005, primarily achieved by reinforcing the requirement that 90 percent of the served population

must come from low-income families.

Foster Care Program: In the Foster Care Program, we developed

a methodology for estimating a national error rate centered around

eligibility, and these eligibility reviews are required by regulation.

The fiscal year 2004 rate was 10.3 percent. That dropped to 8.6

percent in 2005.

The Temporary Assistance for Needy Families, TANF Program.

Although we have had many pilots which were successful, we have

not yet identified an efficient and effective approach for determining an estimate of improper payments in the TANF Program. In

the meantime, we have installed alternative procedures to stop improper payments immediately upon discovery.

States are finding remarkable success in matching various data

bases to look for individuals who are drawing benefits in more than

one State, individuals who are employed in one State and drawing

benefits in another State, and individuals who are newly employed

and are not informing State officials. I am pretty excited about

these data base matches.

Child Care Program. As with TANF, the Child Care Program legislation gives the States great flexibility in the design and administration of the program. For child care, we have initiated an improper payment pilot in which 19 States have participated. Based

upon these pilots, we believe we have a methodology to valuate

participant eligibility, which we have determined to be our greatest

risk area.

In conclusion, Mr. Chairman, Mr. Duncan, the American taxpayer is well served by the money spent by HHS to combat improper payments and particularly health care fraud and abuse. Let

me leave you with a very impressive recovery statistic. Since 1997,

we have spent $5.7 billion on Medicare program integrity work and

have recovered nearly $82 billion. That is a 14:1 return rate over

the life of this program.

Thank you for the opportunity to give you an update on the Department’s improper payment initiatives, and I will be pleased to

answer any questions you may have.

[The prepared statement of Mr. Johnson follows:]

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Mr. PLATTS. Thank you, Mr. Secretary.

Mr. Williams.

STATEMENT OF McCOY WILLIAMS

Mr. WILLIAMS. Thank you, Mr. Chairman, Congressman Duncan.

I am pleased to be here today to discuss the governmentwide problem of improper payments in Federal programs and activities. Our

work over the past several years has shown that improper payments are a long-standing, widespread, and significant problem in

the Federal Government. The extent of the problem initially had

been underestimated because only a limited number of agencies reported their annual payment accuracy rates and estimated improper payment amounts prior to the passage of the Improper Payments Information Act of 2002. Our work has also shown that primary causes of improper payments are lack of internal controls or

a breakdown in existing controls.

The act has increased visibility over improper payments to a

higher, more appropriate level of importance. It requires executive

agency heads, based on guidance from OMB, to identify programs

and activities susceptible to significant improper payments, estimate amounts improperly paid, and report on the amounts of improper payments and their actions to reduce them. Further, in fiscal year 2005, OMB began to separately track the elimination of

improper payments under the President’s management agenda.

Mr. Chairman, fiscal year 2005 marked the second year that

Federal agencies governmentwide were required to report improper

payment information in their performance and accountability reports. The governmentwide improper payment estimate for fiscal

year 2005 exceeded $38 billion, but did not include any amounts

for some of the highest risk programs, such as Medicaid, with outlays exceeding $181 billion for fiscal year 2005.

While the Federal Government has made progress under the

leadership of OMB, significant challenges remain to effectively

achieve the goals of the act. For example, while progress has been

made in identifying programs susceptible to the risk of improper

payments, the full magnitude of the problem remains unknown because some agencies have not yet prepared estimates of improper

payments for all of their programs. We note in my written statement that seven major agency programs with outlays totaling

about $228 billion have not reported improper payment estimates.

These agencies have been required to report this information since

2002 with their fiscal year 2003 budget submissions under previous

OMB Circular A–11 requirements. Further, agency auditors have

identified major management challenges related to agencies’ improper payment estimating methodologies and internal control

weaknesses for programs susceptible to significant improper payments.

We recognize that measuring improper payments and designing

and implementing actions to reduce them are not simple tasks and

will not be easily accomplished. The ultimate success of the governmentwide effort to reduce improper payments depends on the level

of importance each agency, the administration, and the Congress

place on the efforts to implement the act.

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In closing, I want to thank you and the members of the subcommittee for your continued interest in this issue and providing

important leadership and oversight. I look forward to continuing to

work with this subcommittee as well as Federal agencies to help

address this problem.

This concludes my statement. I would be pleased to answer any

questions that you or other members of the subcommittee may

have.

[The prepared statement of Mr. Williams follows:]

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Mr. PLATTS. Thank you, Mr. Williams. I appreciate all of your

testimonies, as well as the written documentation you have given

us. And where I would like to begin is, as I read through all the

written testimonies last evening, a couple issues kind of jumped

out and followup from where we were a year ago. And I think

maybe, Dr. Combs, you in a broad sense and, Mr. Secretary, to you

specifically, with your Department, you know, this act is now 4

years past its enactment, and yet we have seven agencies not reporting in any sense about their improper payments. And a good

number of those are at HHS.

I guess first, if we could start—you know, I read some of the explanation of where we are, especially with HHS and the cooperation of States when it is Medicaid and some of the Federal-State

partnerships, but, you know, we still are 4 years down the line, and

we are still talking about what we are going to do, and perhaps in

2007 or 2008 that we will start to see some estimates.

I guess what I am looking for is a more specific answer to why

it is taking so long in the general sense and then specific to HHS.

Dr. Combs.

Ms. COMBS. I think that is certainly a valid question, and, Mr.

Chairman, I certainly add my commendation to you and this committee for keeping this in the forefront of all of our minds, because

a lot of what we can and should be doing in the departments and

agencies, we must do as a continual partnership, and we truly appreciate the efforts of you and your staff in helping us with that.

Mr. PLATTS. And I wanted to say up front that, one, I do not

want to diminish the good-faith effort that OMB and the departments and agencies are making, and to acknowledge that progress

has been made in the areas where we have been able to target it.

And that kind of is the reason for the question. We are not able

to maybe target if we do not actually have a good understanding

of what is out there on some of these other areas. But I agree, it

is a partnership, and it has been a very important working relationship between the departments, agencies, OMB, and this committee. I apologize for the interruption.

Ms. COMBS. No. Thank you, Mr. Chairman. I do not consider that

an interruption at all. I look forward to this kind of dialog and continually having this kind of dialog as we work through these very,

very tough issues together.

I guess since we know my good friend Charlie Johnson is here

and he represents what I consider to be some of the best of the best

in the CFO community, and working with folks like him on a dayto-day basis in the CFO community and knowing of their commitment and their absolute resilience to making sure that we are

doing better by the taxpayer’s dollar on a day-to-day basis, is an

extremely important avenue for us to have and to continue to work

through in these departments. And knowing he is going to be here

to chime in on some of these more specifics, one of the things I

would like to just put on the record and kind of step back for a

minute and let us remind ourselves of is if you look at the total

Federal outlays—and, Mr. Duncan, I specifically was intrigued by

your discussion of how you continue to convey this to the American

people, because that is very important for us as well.

64

But if you look at the $2.5 trillion we have in outlays, and we know that beginning in 2004 we looked at $1.5 trillion of those, so

we identified—about 60 percent of all of our Federal outlays were

identified as being high risk susceptible. And if you take that down just another step, we had $1.2 trillion

or 85 percent of those that we are now looking at in terms of the

error in our improper payments, we have error rates for 85 percent

of that. And, in addition, we have also—thanks to the help of this

subcommittee, we have been looking at contract payments.

So if you look at the 15 percent that we do not have measurements for right now that we are going to be addressing in future

years, that 15 percent is $300 billion, and that is a lot of money

by anybody’s standards. But when you look at that and compare it

to where we are stepping down from, and stepping down from that

$2.5 trillion, that makes a lot of sense in terms of where we are.

But we have about 28 percent or $659 billion in contract payments

that we have looked at.

And then if you look at the rest of where that $2.5 trillion is, you have about $341 billion or so in other payments that really are not

related to improper payments. It is payments on the debt or compensation.

So if you go back to the programs, just the programs that we are

looking at, you see that we can look at ourselves and, in good faith,

say, yes, we have really been doing a lot of good work here. And

I think it is important to step back from the total corpus of what

the total Federal outlays are and keep that in mind.

So, yes, we are concerned about that remaining 15 percent. We

are concerned about every single dollar there is. But we also recognize that we have done a lot, and we have a good plan and a good

path out for addressing the total amount of improper payments we

have.

Mr. PLATTS. Dr. Combs, I would agree in the sense of the big picture governmentwide, now that we are in phase two, as you refer

to it, and 85 percent. But if we get to specific programs—and I will

stay aside from HHS before we get to the Secretary—Agriculture

and HUD, if you looked at their specific programs, you could say,

well, in 4 years we have made zero progress to their specific programs, meaning we are 4 years down the road without any reporting on possible improper payments at all.

So while, again, in the big picture we have made progress, but

my question is: Why is, you know, the school programs, why at

HUD the CDBG, you know, specifically them? The law says, you

know, annually they will report on the susceptibility of improper

payments. OMB moved forward in a very timely fashion, developed

the regs and issued them in 2003. Yet 3 years later, those specific

programs have not yet fulfilled the requirements of the law or

OMB’s regulations.

Ms. COMBS. Well, I agree with you that we have to continue to

focus on those, and we are doing that. But I think the measurements of improper payments for these particular programs is due

particularly in large part to the size and the complexity of these

programs as well as some resource and timing issues. Because of

the complexity, it is taking a lot longer in many of these programs

to get where we need to be.

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Mr. PLATTS. In several of the programs, prior to the Improper

Payments Act being passed, OMB was already requiring them,

through an administrative requirement, to report. And so it was

not even something new. In essence, they were supposed to be

doing this already through administrative action or executive action.

If we look at specifically Department of Ag. and school programs,

what has been done for 4 years? You know, and I guess—is there

a plan that has been laid out back in 2003 saying, all right, here

is our programs, and here is how we are going to chip away at getting to a plan, and they actually have now for 3 years worked on

that plan to where they are getting to where they say in 2007 they

think they can finally give an estimate? Or was there problems

along the way that they did not get started to 2004 or 2005, or they

started and changed plans?

I know we are going to get into some of that detail. You do in

your written statement with HHS. And maybe that is—maybe we

want to jump over to HHS and give us some of that detail for your

specific programs with the majority of them being at your Department.

Ms. COMBS. Let me, just before my friend Charlie says that.

Mr. JOHNSON. Sure.

Ms. COMBS. One of the things you are going to hear from Charlie

is what you just asked for, Mr. Chairman, in terms of the plan and

a very well laid out plan. Those are the kinds of things that are

going on in these other departments, too. It is not like we are ignoring those by any stretch of the imagination. We have——

Mr. PLATTS. Were they going on—I mean, since 2003 and 3 years

we are still working on the plan?

Ms. COMBS. I think you will understand better when my friend

Charlie Johnson talks about the complexity of their program and

their plan. The complexity of the situations that you have just

talked is very similar, and what you also need to understand is

that we really are firm believers in putting people on this plan, and

we have a plan in place, and we hold people accountable for coming

to us and explaining where they are at each step along the way on

these plans.

Thank you.

Mr. PLATTS. And I appreciate the gentleman from Tennessee’s indulgence as I know I am way over my initial round, so thank you.

Mr. JOHNSON. Your question is a very legitimate question. The

same question I asked when I came in and why is it 4 years after

the passage of this act and we are not completed in Health and

Human Services. And I have studied that, and I have learned a lot

about it.

First and foremost, a program that is solely within our direction,

Medicare, we did start that process in 1996. And as I indicated in

my testimony, we have a very sophisticated program, but that is

a program solely within our control. We design it, we test it, we

spend the money for testing improper errors.

Then we move from there to State programs where we are participating with States, and I spent the first part of my government

career as chief of staff to Secretary Leavitt when he was Governor

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of the State of Utah. So I know the State side of this, and I guess

I have a little bit of appreciation.

But if you take Medicaid, I believe every State has in some sense

been trying to reduce improper payments in Medicaid. I believe

they have been trying in TANF and child care and adoptions and

SCHIP. The difference is when you get down to trying to get a statistically valid error rate that you can present for the Federal Government as a role—as a total with 50 different States, that becomes a lot more complicated. And if we take Medicaid, we have

had a lot of programs. We have had PAM and PERM, and we finally decided, look, this is very much like Medicare except it is 50

different Medicares instead of one Medicare. Let’s take something

that is proven and now start using that program. But that is an

evolution. People go down paths with good intent, always with good

intent, and with good results by the way.

We do not have a statistically valid number to give you, but I can

tell you that these front-end efforts have reduced improper payments, but we cannot tell you by how much. So we have now a

plan, and it is in process. We are in process now on the Medicaid.

When you get to TANF and Child Care, by design the Congress

has said we want States to have a lot of rights in not only design

of that, but in less interference from the Federal Government.

There are certain things we can ask for and certain things that we

cannot. But that is by design. And I understand that.

So we need to—we have been working for a way to come up with

good improper payment rates without asking for legislation that

forces this upon the States. We have tried to work very cooperatively with the States. Again, I think we have—in each of those

programs, we now have a plan. But this has been evolutionary, and

this has taken some time. In the meantime, I can tell you that

some of these tools that we have used, we have had significant recoveries.

I was talking about, you know, the State programs using these data matchings. There are millions—Pennsylvania I think was $44

million in matches that they have saved in the TANF program.

Now, we cannot report that to you as something that is a reduction in an error rate that we had a baseline and we can tell you

it has moved from this percent to this new percent. But I can tell

you a lot of good things are going on.

But at the end, I have to say we are where we are at HHS, and

I think we now have a place to go forward from that will get us

to where we need to be. But it has been a long and almost tortuous

process to get there, and I concede that.

Mr. PLATTS. And I certainly appreciate, Mr. Secretary, the challenge when it is State programs, and that, I guess two followups,

and you kind of touched on the one. While there certainly needs to

be a respect, having come out of the State House myself, and, you

know, States having some autonomy of how they operate, but the

ability of HHS to say, without even legislation, you certainly have

the responsibility of ensuring against fraud and waste and mismanagement, which would seem to give you the authority to say

to fulfill that statutory requirement of guarding against that, that

this is, you know, a requirement to participate, because it seems

like in the various programs, the problem has been getting the

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States actually to participate in TANF specifically where in contacting States that, you know, not many took you up on it, you

know, even when you reached out and maybe explained the benefits of it; whereas, in the D.C. pilot, in the new hires match, I

mean, the numbers are pretty staggering.

Mr. JOHNSON. They are staggering.

Mr. PLATTS. Once they ran the program of cutting out the fraud,

in essence, that was going on, and by your testimony, it is, I think,

31 States, D.C. and Puerto Rico have conducted a State match.

What is the reason you are given for the other 19 States for saying,

no, we do not want to save money?

Mr. JOHNSON. And, again, I think this is one that it builds. I

think you will have another 19 States aboard. We are bringing

States in. We are training them on these data match programs. We

are showing them the benefits of Pennsylvania, and New York was,

again, a very large number.

So I think it is—I call it ‘‘marketing.’’ You know, we have to market these programs, and we are doing that in a much more aggressive fashion.

Mr. PLATTS. Because, I mean, if you look at just the D.C. pilot,

a third of the individuals were submitted for the match, and over

80 percent of those, so basically 25 percent of all were actually employed based on that pilot. I mean, that is a huge percentage that

were taking advantage of the system.

Mr. JOHNSON. And it is, and that is why States are finding success with this. They have new hires matches, and the more States

that get in, then the more people we pick up, because if somebody

vacations in Florida and lives in Pennsylvania, they may be getting

benefits both places. And when you get both States in it, then it

becomes more robust and much more useful. So, again, it is building but we are not there, and I can see that.

Mr. PLATTS. Well, and I appreciate being in the position for the

past year, and your jumping into this and being aggressive is something I appreciate because as the numbers tell us, these Statepartnered programs are critical to get in that other 15 percent. I

mean, you look at the numbers, you know, Medicaid in particular

is the big one. And when we have had Comptroller General Walker

here and we talk about the fiscal challenges, you know, facing our

country, Social Security is a problem. Medicare and Medicaid are

terrifying. You know, those are the fiscal disasters that are coming

without changes. And if we just extrapolate the percentage of the

$1.2 trillion that we have looked at over to $38 billion, if you extract that to the remaining $300 million to go after—or $300 billion, we are talking maybe another $10 billion on a conservative

end of improper payments, and maybe even more because of the

type programs being State partnership that there may be a higher

propensity. Those are huge sums.

Mr. JOHNSON. They are. And I think helping to mitigate will be

some of these programs that we had put in place, because we are

going to have huge increases. I mean, Part D is a huge new increase.

Mr. PLATTS. Absolutely.

Mr. JOHNSON. Managed care is growing. But some of the data

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sis, claims behaviors, and some of those things will help us detect

it in advance rather than—help us to prevent it in advance rather

than have to detect it later on.

Mr. PLATTS. Right.

Mr. JOHNSON. That is our goal. Let’s stop it at the beginning

point.

Mr. PLATTS. I have some followup questions, but I have overstayed my first round of questions already, and I would like to recognize the gentleman from Tennessee, Mr. Duncan.

Mr. DUNCAN. Well, thank you very much, Mr. Chairman. And

you mentioned Mr. Walker, and he has appeared before this subcommittee and some other subcommittees that I am on, and I think

he is—I really admire and respect his attempt to be a Paul Revere

to try to alert the country to the tremendous financial problems

that we are facing for unfunded pension liabilities and all sorts of

things. And, in fact, I don’t know how in the world we are going

to pay all these military pensions, civil service pensions, Social Security, Medicare, Medicaid, prescription drug benefits with money

that means anything within a few short years. But at least I do appreciate the progress that has been made since our last hearing,

and I appreciate the progress that, Mr. Johnson, your Department

has made. And like you, it sounds hopeful, this new data base information that you are talking about to try to overcome the duplication of benefits that people might be receiving.

But the GAO report, Dr. Combs, says, ‘‘However, the magnitude

of the governmentwide improper payment problem remains unknown. This is because, in addition to not assessing all programs,

some agencies had not yet prepared estimates of significant improper payments for all programs determined to be at risk.’’

Do you disagree with those statements? And assuming that you

do not, how close do you think we are to getting a handle on this

problem, particularly the magnitude of the problem?

Ms. COMBS. I think we certainly do understand that there are

about 10 programs out there that—many of which, and one you

just—or two you just head about here—represent about two-thirds

of those 10 programs that we just do not know about yet. How close

do I think we are? I think we are pretty close, because when you

think about the kinds of error rates that we have found and the

risk susceptibilities that we found, when we first went out and

identified 60 percent of all of our outlays as being risk susceptible,

that was a pretty high amount. And now, you know, of that 60 percent, we are into the 85-percent category of really knowing what

those improper payments are.

And many of these programs over time have had some measures,

and many of them have been pretty stable over time—some of the

very, very large ones, anyway. So——

Mr. DUNCAN. Well, how do we know that—how do we know that

these reports are accurate? I mean, you know, a lot of people feel

that to really get a true picture in an accounting situation, you

have to have some outside auditor, not somebody that is inside.

And, of course, then we have established over the last few years

all these Inspectors General in all these departments because we

were not satisfied with the accuracy of the information we were

getting from some of these departments themselves.

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Have the Inspectors General in these various departments or

agencies been involved in this process? Or how satisfied are you

with the accuracy of the reports?

Ms. COMBS. I am satisfied that we continue to improve that accuracy, and in the departments and agencies that we do the best, we

have Inspectors General that work hand in hand with our CFOs

and with program managers to help them with their risk assessments. They help them look at the improper payments as well as

other internal control mechanisms that they need to be employing.

And I think since 2004, this agency reporting has improved significantly. Inspectors General look at these reports, as do we, to see

if they pass the reliability test, so to speak. And I think that the

effective practices that we continue to see are strengthened and expanded every year. And as I said, the programs and the departments that seem to do the best with these are the ones where we

see a close collaboration and a close working relationship between

the CFO and the Inspectors General.

Mr. DUNCAN. So we can feel that the OMB is sort of the outside

agency, and GAO and the Inspectors General, that we really don’t

need to require some sort of outside audits of some of these programs. Yes, Mr. Johnson?

Mr. JOHNSON. I was just going to say, we have used an outside

auditor for this very purpose. In Medicare, our Inspector General

started this system in 1996, and then we have developed it to a

point where it became ready to go prime time, they have signed off.

Then we brought PricewaterhouseCoopers in to also evaluate, and

they have also signed off. So we have used both Inspector General

and the outside auditors that you are talking about for that particular program. That is why we know this one works, and that is

why we want to replicate it in the Medicaid area.

Mr. DUNCAN. All right. Well, I noticed that of the seven major

programs, you have—and you know, everybody in the Congress

wants to do all we can for the veterans, but—and, of course, in this

country—I do not guess there is any developed nation that even

does 10 percent of what we do for our veterans. But I noticed—but

that is an awfully big Department, but they are not in here. Why

is that, Mr. Williams? Are they just doing a fantastic job where

some of these others are not? Or what can you tell us about that?

Mr. WILLIAMS. Congressman Duncan, actually when you look at the $38 billion, there are three programs from the Department of

Defense that are actually reported that they had programs with

significant improper payments—that actually reported amounts. It

was the health, the benefits, and military pay—military pay being

a new program that reported this year.

Mr. DUNCAN. So they are included in the——

Mr. WILLIAMS. I think the schedule you are looking at are the

ones that did not report that were required to report. But as far

as those that actually did report, there were three programs that

defense reported this year. There were two programs last year.

Military pay is——

Mr. DUNCAN. Well, no, what I am looking at, it says improper

payments reported in fiscal year 2005, and it says 95 percent were

from Medicare, Earned Income Tax Credit, Old Age and Survivors’

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curity Income, Public Housing, Rental Assistance, and Food

Stamps. They could be—what you are talking about could be in the

‘‘Other’’ programs, which is 5 percent. Is that right?

Mr. WILLIAMS. That is correct. That is correct.

Mr. DUNCAN. OK.

Ms. COMBS. The first seven programs that were assessed, Mr.

Duncan, that you are referring to, I think you are referring to VA

benefits as opposed to DOD. Is that correct?

Mr. DUNCAN. Yes.

Ms. COMBS. It is included in this slice of the pie up here with

‘‘Other.’’

Mr. DUNCAN. Well, of course, I am also—I am interested in any

of these departments as to, you know, what amounts they are reporting and whether they are reporting accurately and what they

are reporting. Talk about Mr. Walker. I remember at another subcommittee of this committee, he told us one time that the Defense—he was the Inspector General of the Defense Department

before he became head of the GAO, and he told us that the Defense

Department has misspent $35 billion in Iraq and had lost another

$9 billion that they just could not even account for. That is $44 billion.

Of course, I also remember when I heard Charlie Cook, the respected political analyst, in a talk one time, and he said he did not

think it was humanly possible to comprehend any figure over $1

billion. And I am not sure that you even can comprehend $1 billion.

Now, Medicaid has not given us an estimate. Is that correct?

Mr. JOHNSON. That is correct.

Mr. DUNCAN. Well, Mr. Williams, have the States been cooperative in providing that information, or what is the problem?

Mr. WILLIAMS. We have another assignment in which we have

looked at the various steps and actions that States have taken.

States have actually been working to try to identify ways in which

they can do risk assessments. It is kind of a mixed bag as far as

the progress that they have made. In surveys that we did, they basically stated that in doing this particular process and trying to

identify improper payments, that there were various areas in

which the Federal Government could assist them.

Of course, one of the first things that we always heard was more

money could help us out in this process to help people to work on

identifying the improper payments. But they also requested assistance in the area of additional guidance, clarification on guidance

that is provided from the Federal Government. And also in looking

at this process, one thing that we, GAO as an organization, looked

at was the possibility of more coordination between the Federal

Government and the States, looking at best practices, opening communications, and working at the State and Federal agencies to

make sure that those best practices are out there and, what is

working in one area, that information is spread throughout the rest

of the States so that every effort can be made to reduce this number to a manageable number.

Mr. DUNCAN. Well, you know, when you say that they say they

do not have enough money, this is my 18th year in the Congress,

and I cannot tell you how many times I have heard over the years,

every time there is a problem, no matter what the problem is, they

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tell us one of two things: either they do not have enough money,

they are underfunded; or their computers are obsolete. [Laughter.]

I mean, it amazes me.

Now, I will tell you that I read in the Knoxville News Sentinel,

though, a few days ago—they have a Thought of the Day, and they

said, ‘‘To err is human. To err completely requires a computer.’’

[Laughter.]

I put out a newsletter, like I said, with no pictures or anything,

and I cover about 30 topics or so each time I do it, in just kind of

a short way. But I will read one little part of this part that I wrote

about our hearing last year. ‘‘One of the largest programs, Medicaid, at $175 billion, could not even be measured. Two days before

our hearing, the New York Times completed a year-long investigation of the Medicaid program in New York and found billions in

fraud and abuse. The chief investigator estimated at least 10 percent in criminal fraud and another 20 percent in improper payments. If this figure is nationwide, this would mean over $50 billion in the Medicaid program alone that was not included in the

$45.1 billion mentioned above.’’ The $45.1 billion was the figure

that we had last year that there has been this progress on.

I mean, was the New York Times—do you think they were way

off base? You know, I do not suppose we are really going to know

this problem and how big it is until we find out a little bit more

about this Medicaid. Do you all think that there is any possibility

that the New York Times was right and that there could be a 20-

percent improper payment figure on Medicaid nationwide?

Mr. JOHNSON. I am going to ask Mr. Hill to answer that. I can

tell you that there are—because I do not want to speculate, but I

can tell you that we have some programs, for example, where we

match Medicare recipients against Medicaid recipients, the socalled Medi-Medi program. And we do find a lot of Medicaid errors

in that situation, where people are drawing, you know, both. And

so I think it is fertile ground, but States have an incentive to control that because they get to keep the money. They keep their

share of the funding. And so they are not without great incentives

and great rewards.

I would mention also that you had talked about more money. In

your Deficit Reduction Act, you did give some funding now for Medicaid integrity. I think it is $5 million the first year and then $50

million each year thereafter for the next 4 or 5 years.

But, Tim, Mr. Hill, would you care to speculate on the New York

situation?

Mr. HILL. I think I would be surprised, quite frankly, if the rate

was 20 percent across the country. I think that in New York in

particular, when you have an investigator who wants to make a

point——

Mr. DUNCAN. Surely you would not question the New York

Times, would you, Mr. Hill? [Laughter.]

Mr. HILL. I do not question the press. But I would say, speaking

to Mr. Williams’ point, and as Charlie highlighted, the DRA provided significant resources to do a lot of the things that the GAO

has asked of us, sort of working with the States to export best

practices across the States, match data to be sure that the States

have everything that they need to continue the incentives that they

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have to find the improper payments that are there, because as Secretary Johnson said, they have as much, probably more incentive

than the Federal Government does to find and eliminate improper

payments because their budgets are as strapped or perhaps even

more strapped than the Federal Government’s. And so they definitely have a vested interest in finding those improper payments.

Mr. DUNCAN. You know, I do not hear anything from Medicaid

people on their bills, but I sure hear from a lot of senior citizens

who are upset about things that they find on their hospital and

medical bills that they think—services or things that they think

they never received that popped up. I do not know how widespread

that is, but well, all right, thank you very much. It does sound like

we are making some progress. I hope, Mr. Chairman, you will keep

moving on this and particularly that we need to followup with

some of these agencies and departments that are not reporting and

see what we can find out about that.

Mr. PLATTS. Well, Mr. Duncan, that is actually my next focus,

the fact that eight of the departments say they have no programs

susceptible to improper payments, and two in particular I would

like to focus on, and probably, Dr. Combs and Mr. Williams, if you

want to comment. According to the information, DHS is a Department with about $40 billion in outlays saying they have no improper payments—or no programs susceptible to improper payments. In the 2005 audit, the auditor said that—cited DHS as

being in noncompliance with the Improper Payments Information

Act and went on to say that it failed to institute a systematic method of reviewing its programs and identifying those it believed were

susceptible to significant erroneous payments and for not performing test work to evaluate improper payments for all of its material

programs.

So, you know, in the number we have, it is encouraging—and I

want to get into even the drop that we see from 45 to roughly 38.5,

but part of that number last year and again this year is these two

programs, DHS. And we know that the auditor is saying they actually did not comply with the law, yet they get the report saying we

do not have any programs, and then for DHS specifically, you

know, we look at GAO’s review of the Katrina relief, and just in

one program, the Individuals and Households Program, where

there were significant flaws found and about $5.5 billion was given,

and just in the one aspect of that, the debit card recipients, that

5,000 of the 11,000, so almost half of the recipients gave false

names, addresses, Social Security numbers.

So, I mean, we have clear evidence of improper payments, yet we

have the Department saying we do not have any programs susceptible. So how does the Department get away with saying it? And

what does OMB do in response to their saying they have no programs, yet the auditor says, well, you did not even follow the law,

and GAO has found evidence that, yes, they have significant improper payments being made?

Ms. COMBS. Thank you for asking about that because, one, we

are pleased a risk analysis was done at DHS, but we, too, have concerns that there needs to be a deeper look at DHS. We have talked

with them. We know that there are a couple components they have

reported on. We are pleased with that. We have an assessment of

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the situation there, and through their PAR, of course, they report

on this. But more importantly, and consistently throughout the

year, they report through the President’s management agenda. And

we have asked them to look at closing the reporting gaps that have

been identified by the Inspector General, and we have looked at

their plans. We continue to work with them on their plans. And we

are continuing to hold them accountable to expanding both their recovery audits as well as—well, particularly their recovery audits

because a lot of what they do is contracting. But we have also

asked them to do a deeper dive into their program areas and to

give us their plan on that as well.

Mr. PLATTS. So exactly what message is conveyed from OMB to

the DHS Secretary and then his subordinates that, you know, you

have given us, OMB and the American people, a statement that

you have no programs, but we know from your audit you actually

did not do what you needed to do to make that assessment? In essence, I guess what I am asking, in this specific case—and it really

relates to a broader—because at HHS, while I may not be pleased

that we are 4 years down the road and we are talking maybe another 2 or 3 years before we get to where we want to be, but there

seems to be an acknowledgment of the risk out there and a goodfaith effort to get their hands around it. With DHS it seems they

are just saying, hey, you know, we are not at risk, even though we

know they did not comply with the law. So what consequences?

Was there any recommendation that the CFO be reprimanded,

that, you know, any Secretary, Assistant Secretary, anybody be

held accountable for failing to comply with the law as the auditor

is telling the Department did?

Ms. COMBS. Well, I think the corrective action plans that we require them to do are looked at by the highest levels in the agency,

and certainly one of the things that we are asking them to put

these tools in place, such as the accurate measurements and to

really assess and dive deeper into their analysis.

We have the same concerns that you are expressing regarding

the particular analysis that was done, and I do know that particularly in the one program—and I assume you are specifically referring to FEMA when you talk about that.

Mr. PLATTS. Right.

Ms. COMBS. We know that they have already put a measure on

the street to go in and look at that, much like what Secretary

Johnson talked about in terms of the assessment that they do with

the internal controls. We know that those kinds of things are taking place. Are they taking place at the speed which we would hope

and we would like? Not necessarily, and that is why we are asking

them and holding them accountable for that.

Mr. PLATTS. And one of your challenges, Dr. Combs, is—you have

been asked today and regularly to defend the actions of others that

you do not have direct say over, and I would not want to be in your

seat.

Ms. COMBS. Well, I can assure you, this is the first experience—

normally, in my entire career, I have been in line management

jobs, and it is a bit different.

Mr. PLATTS. And I guess my belief—and in this case, it is dealing

with improper payments. At other times it is mismanagement of fiVerDate 11-MAY-2000 10:38 Jun 16, 2008 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 C:\DOCS\41851.TXT KATIE PsN: KATIE
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nancial management programs being not well planned and GAO

has assisted us in what should be done up front that, unfortunately, many times has not been done, and so we spend millions

and realize it will not work.

But does OMB—I mean, you are the one who is given this information, and then you are called on to respond about it in this case.

It seems to me that it would be appropriate of OMB to go to the

White House and say, listen, you know, the President’s management agenda, this Department is not fulfilling the requirements of

the law, 2002, or the regulations that OMB has passed pursuant

to law. And the White House needs to get engaged and say to Secretary Chertoff and his subordinates, Follow the law or else.

I appreciate that there is—as we are doing oversight, you do, in

essence, oversight. But it is kind of on an even playing field. Unless

it comes from the White House back down, it is equal partners to

some degree. Is there any of that kind of dialog to try to pursue

consequences for a major Department spending $40 billion, not following the law, to be held accountable from the Secretary on down

for what the auditor tells us is violation of Federal law?

Ms. COMBS. I can assure you that the President’s management

agenda is taken seriously by the Department, and when and if you

ever or GAO or the internal Inspector General find things that

really need to be followed up on, those are followed up on by seniorlevel people talking to senior-level people in those departments and

agencies. The transparency that is created by the President’s management agenda where people are given scores and it is publicly

held out there for everybody to see, says to everyone we are expecting and demanding of you the kind of behaviors and the kinds of

efficiencies that you are demanding as well.

Mr. PLATTS. In those scores—and, actually, one of the things I

did not understand. In my understanding, in the current eliminating improper payments scorecard, DHS actually has moved up to

a yellow. I guess I was not certain of how they get a yellow when

the 2005 audit is telling us, well, they are actually not doing the

test procedures, they are not complying with the law. So what is

it that they did that allowed them to move up on the scorecard, despite not complying with the laws and OMB regs?

Ms. COMBS. There is a plan that they have presented to us, and

those are assessed at least quarterly for every department, and

some departments we look at on a monthly basis because we feel

like we cannot let a quarter go by. We just need to address the accountability issues more frequently than that.

But the things that they are held accountable for are presenting

a plan where they will show certain progress, and if they achieve

certain progress on the accurate measurement of their high-risk

programs, for example, or sound corrective action plans toward reduction targets would put them in yellow. But that is only a quarterly score, and if they do not meet or keep up the next quarter’s

or the next month’s even plan relative to that, then, of course, we

use those scores to move them back to red.

In this particular case, they had certain deliverables that they

were presenting to us. We held them accountable for those, and we

found that they had achieved those specific deliverables. And that

is why they were rated yellow.

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Mr. PLATTS. And that would be, in essence, since the bulk of the

205 year, which is what the auditor was looking at, those are encouraging words, perhaps, that they are moving forward with the

plan.

Ms. COMBS. Yes.

Mr. PLATTS. Even if they were not in compliance in 2005, that

they are working toward compliance.

Ms. COMBS. Yes.

Mr. PLATTS. Am I taking that——

Ms. COMBS. You are taking that exactly correctly. I think Secretary Johnson will know, as I, too, have been the receiver of those

scores when I was CFO, a little bit of a help and push to say, OK,

you are on the right path now, we want you to stay there, is a big

help to many of the people who are responsible for doing this in

the departments and agencies.

Mr. DUNCAN. Mr. Chairman, I have some people waiting for me.

Can I get into one——

Mr. PLATTS. Yes, please do.

Mr. DUNCAN. I assume that just about everybody here knows

this, but there might be somebody here who does not, that we are

talking about not just payments to beneficiaries but improper payments to employees and also Government contractors. But what I

am interested in, Mr. Williams, last year, we were given language

by the GAO that said that the agencies found that more than 60

percent of Government outlays for fiscal year 2004 are $1.4 trillion,

now $2.3 trillion, is at risk for a significant level of improper payments.

Now, do you know where that figure came from? Or has that figure gone down, or is that still basically—and by saying it is at significant risk I assume does not mean that—I mean, I know it does

not mean that much was made—was improperly paid, but that is

what is at risk.

Mr. WILLIAMS. That number is based on the agencies, the individual agencies, doing their own assessments. And it is just a compilation of pulling together that information from all of the major

agencies within the Federal Government.

Mr. DUNCAN. And how do you think that was—maybe you do not

know, but how do you think that was determined? In other words,

in one respect that is a real high figure. On the other hand, I guess

depending on how you define the words, you could say that 100

percent of the Federal budget was at risk for improper payments,

could you not?

Mr. WILLIAMS. I think what you have here is a process in which,

first of all, we have not—at GAO we have not done an assessment

of drilling down and looking at that particular process. But it is obvious that when you are doing a risk assessment and you are looking at this process across as many agencies that we have in the

Federal Government, that there is probably some variation in the

methodology, the processes, and the procedures as to how to go

about doing the assessments. But we have not drilled down.

What we have done, as far as this particular legislation is concerned, is in the initial stages we have focused on what we think

is the big picture, and that is looking at the major components of

the legislation, what agencies are required to do, and based on that

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we are looking at are they actually reporting, are they doing the

assessments, to get past that first phase and then what we would

anticipate as we get down the road is to start taking a closer look

at some of the specifics that are called for, such as what is the

quality of the risk assessment.

For example, you had mentioned a while ago about the auditors

actually attesting to whether these are reasonable numbers or not.

I would say in that particular area that you probably have a process in which what we have done is looked at what the auditors

have said, and we have had no reason to doubt their statements

that they have made in their reports. And a couple examples that

we were just talking about here was the Department of Homeland

Security in which there was no number reported, and yet the auditor stated that the overall assessment could be improved, is one

way of putting it.

Another one was the Department of Justice. If my memory

serves me correctly, it basically fell into that same category of that

group of eight that said that they had no programs that were susceptible to significant risk. Yet the auditors in their report identified a particular program in which there was no risk assessment.

I think it is too soon—and I will link in one of the other questions that you asked also as to what do we think that number

should be. Should it be as high as $50 billion? I think it is too soon

to tell exactly what that number should be. I think that there are

a lot of things that still need to be done in order for us as a Federal

Government to get our hands around this particular process. Those

are just a few of the things I just mentioned right then. We have

not looked at all of the programs. I do not know if I am comfortable

as an auditor—or I cannot say as an auditor at this particular

point in time that I am comfortable that the risk assessments that

are going on across the various agencies is something that I am

comfortable with. I think you can just look at the conversation that

we had a few minutes ago about the Department of Homeland Security.

There are other factors that I think would need to be looked at

when we start talking about this area because there has been discussion in the past about the issue of significant improper payments. There are various things that could go on as far as, you

know, how you look at the word ‘‘significant.’’ I can give you an example of where we currently have the criteria of $10 million and

2.5 percent. I think there are a couple of ways that you can look

at that. If you have a program—if you have an organization that

has 10 programs and in order to hit that 2.5 percent, you would

have to also have $10 million. And each 1 of those 10 programs

came in at 2.4 percent, and they came in at $9.9 million. When you

put them all together as an agency, you are talking $100 million,

yet none of them would have to report under the requirement that

we have here.

So there are a lot of things that I think we have to still take a

hard look at, continue to work toward the progress that we have

seen over the last year before we can be in a position to say with

what I would call good confidence that we have a handle as to what

that number really is. I think there are just too many uncertainties

right now and too much work still to be done.

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Mr. DUNCAN. Let me just conclude, because I am already running late, but because of what I said at the start of this about the

financial condition of the Federal Government, which we all know

about, I do not see how any work that you could be doing would

be more important than trying to get a handle on this problem and

doing something about it. And I appreciate the work that you all

are doing and the progress that has been made. Obviously, though, the problem is much bigger than the $45 bil- lion down to the $37 billion that we are talking about here today,

as good as that is, I mean, because if you have potentially even

more waste than that and fraud than that in just the Medicaid program, and then we have so many other departments or agencies or

programs that are not reporting. But I sure hope that we keep on

working on this and hopefully do even better in the future.

Thank you very much, Mr. Chairman.

Mr. PLATTS. Thank you, Mr. Duncan. Again, appreciate your participation. I want to come back where I was on the issue of those

that report that they don’t have anything at risk, like DHS. One

of the reasons I ask specifically about what followup happens between OMB and the departments when they come back and say

that is in a visit to a NASA center, and I asked the CFO about

their improper payments, you know, with a lot of contracting and

things, you know, what it was, and the response was, ‘‘We don’t

have any.’’ And I said, ‘‘Well, how do you know that?’’ And the response is, ‘‘Well, we just don’t have any.’’ In other words, it didn’t

leave me very reassured that there was actually what the act requires, a review, a risk assessment actually done. That is what

worries me when I see eight, one of them DHS, which has FEMA

in and of itself, that says, ‘‘We don’t have any,’’ and especially

when you look at the whole TSA aspect of contracts that we know,

huge sums that were made inappropriately.

I want to make sure that, Dr. Combs, from what your testimony

was, that those eight that are saying that, that there is a healthy

dialog, interaction between OMB and those to really be looking at

how they come to that conclusion and how they are going to substantiate that conclusion. And I am correct in that understanding,

that dialog is occurring?

Ms. COMBS. You are correct that dialog is occurring and will continue to occur. NASA, you mentioned them specifically, they had

reported under the recovery audit, and I’m not quite sure what the

person meant that they didn’t have any, but consistent with the recovery auditing requirement, the outlays that we notice from NASA

are, of course, primarily in the administrative and contract funds,

and those are being monitored very, very carefully and will continue to be.

Mr. PLATTS. And that actually is the followup on NASA specific,

and, Mr. Williams, I am going to eventually get to you on DHS and

NASA, but recovery audits is one of the other areas I wanted to

touch on, and specifically with NASA, because my understanding

that the amount subject to review for NASA was about $12 billion,

and yet they only reviewed about $82 million worth of the contracts, and have they given you an explanation? Are you aware of

an explanation of why they reviewed, as part of the recovery audit

process, such a small fraction of what was eligible for review?

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Ms. COMBS. I think the amount that they identified for recovery was $617.

Mr. PLATTS. Right, $617,000.

Ms. COMBS. And they recovered that entire amount.

Mr. PLATTS. Out of the $82 million they reviewed, but there was about $11.3 billion that they chose not to review.

Ms. COMBS. Correct.

Mr. PLATTS. Why, with the ability and authority to do it, is there

any reason you are aware of that they have not engaged in that

review, as the law provides for?

Ms. COMBS. I think one of the things that is on their plan, in

fact, I am sure of it, for 2006, right now, is that they are reporting

on their overall spending this year in 2006, and they’re going to include even more contracting categories in their review this year,

and that is the kind of dialog we are continuing to have with them

on this particular issue. And we just need further expansion from

them on this. I agree with you on that.

Mr. PLATTS. So on the 2006 part we would expect to see a much

larger number actually reviewed than we did?

Ms. COMBS. Yes.

Mr. PLATTS. And that is the type of direction we want to see.

Ms. COMBS. That is right.

Mr. PLATTS. Is that we use the tools that have been given to all of us to pursue the worries out there, because of the $300 billion

that was reviewed, I guess, about a half billion was found to be inappropriate and was collected. I think $557 million was identified

as improper, of which $467 million was then——

Ms. COMBS. Was actually recovered.

Mr. PLATTS [continuing]. Recovered, which is great for the American taxpayer. Again, I do a lot of extrapolation of numbers, and

I know that could be dangerous, but if it extrapolate that $300 billion reviewed and a half billion recovered, if I extrapolate that to

NASA’s amount they didn’t review, it is maybe $20 million that is

probably likely and appropriate on just a straight extrapolation

that we are at risk of not getting if we don’t do the review.

Ms. COMBS. We’re certainly concerned about that, and that’s the

kind of thing that we look to GAO, to the IGs, to partners such as

yourself, that when and if those kinds of programs are found, if

there are any specific programs that people feel like we should dive

into deeper and have more dialog with these departments and

agencies than we’re currently having. As you know, we’ve talked

before with your staff. There are seven or eight programs that don’t

fall within the threshold of the law or with our 21⁄2 percent in addition to that, that we monitor on a very careful and regular basis

simply because we believe that there are specific situations out

there that deserve and merit additional administrative oversight.

And we are committed to doing that, and certainly, thanks to

this committee, we’ve had other opportunities to include that in our

future guidance that’s coming out, and I think your folks have been

looking at that already with us, but it was in direct relationship

to conversations such as this that we’ve had, that we’ve been able

to come up with additional and better guidance.

Mr. PLATTS. I believe that has happened with NASA and with

Gwen Sykes and her efforts of having all those Center CFOs and

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Center Directors working more hand-in-hand with headquarters, to

have a more complete picture and understanding of their financial

challenges and better management across the board. I think that

is occurring, and sounds like with the recovery audits at NASA,

one more step in the right direction, you are going to expand what

they are actually reviewing.

Ms. COMBS. And there again, too, that is an example also of how

an administrative management change in structure within the organization made a big difference in how they are able to hold people accountable, and bring the transparency needed to make those

things happen.

Mr. PLATTS. If we could give you the same authority over all the

department agencies that you have to answer for here, as Gwen

Sykes was able to finally get with the Center CFOs, that would

help a lot for your ability to get them to do what you are after,

right?

Ms. COMBS. Some people think my title, Controller—[laughter.]

Mr. PLATTS. With Director Bolten, who went over to the White

House, you know, maybe OMB is going to have a stronger reach

there.

Ms. COMBS. It helps to have friends everywhere.

Mr. PLATTS. Mr. Williams, I wanted to get your thoughts, comments on specifically DHS and the fact that the auditor did find

them in noncompliance, yet they report no risk, and then also on

NASA, but especially on DHS, the noncompliance issue. Then the

other half of the recovery audits is that DHS, although they report

that they reviewed all of their amounts, the amount they report as

reviewable was a small fraction of what they actually are contracting, so it seems like we are—again, what we reviewed was good,

but there is a whole bunch that we didn’t review that probably

should have been. If you can talk specifically on DHS on those two

aspects, noncompliance with Improper Payments Information Act

and the recovery audit aspect?

Mr. WILLIAMS. Yes. As I was mentioning earlier, when you look

at an organization that first of all had 10 material weaknesses and

two reportable conditions, seven noncompliance issues including

the Improper Payments Information Act, one of the things that we

have talked about in all of my testimonies going back to before the

act actually became law, we always focused on what was the root

cause of improper payments, and it would always get back to the

lack of internal controls or a breakdown in internal controls. So you

have an environment in which there are numerous internal control

weaknesses that have been identified by the auditor, and one issue,

as far as compliance, in which based on their work, they basically

concluded that the agency did not comply with the requirements of

the act.

Having said that, that could be several factors that the agency

might have looked at and determined that it was in compliance. It

could be, again, that we may get back to this issue of looking at

the 21⁄2 percent as far as how the programs were divided up, and

you could have large numbers here in which you might need to do

some of the things, as Dr. Combs mentioned earlier, in which there

are some programs.

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I have done an analysis of the programs that reported in 2005,

and if it had not been for that additional requirement that OMB

placed on the agencies, the numbered issue, instead of being about

38 billion, would have only been about 34 billion because if you

take a look at one of my schedules in here, it basically lays out

those agencies that even though they reported, they pointed out

that they reported because OMB had mandated that they provide

that information this year, and that if it had not been for that

mandate, then they would not have been required to report.

So you could have some of that going on at the agency also. I’m

not for sure, but that is a possibility of a cause, but as I said,

there’s several agencies here, and the total come to about 4.3 billion that would drop that number down to about 34 billion issues.

DHS could have that situation, or it could be a situation in which

the agency is just getting a handle on what needs to be done. I

think the focus, as has been stated here earlier today, is pressure

needs to be maintained on the agency to comply with the requirements of the act, and efforts need to be put out there so that everyone understands that this is important legislation, this is the

American taxpayer dollars that we’re talking about that’s going out

the door, and it is very important that we get a handle around this

issues. And the sooner we get a handle around the issue, the better

off we will be as far as that particular problem is concerned.

So those are some of the things that I would say in that area,

that there needs to be some dialog between, I would say, the agency, OMB, and as well as the Congress, because it’s going to take

pressure from, I think, all of those organizations in order to make

sure that we have that comfort. Because I have not see anything,

as I said earlier, I have not seen anything in the auditor’s report,

because Homeland Security is one of my agencies that I look at

under the consolidated financial audit work that we do each year,

and I have not seen anything that would give me any reason to

doubt the conclusions that the auditors reached as far as the compliance issue is concerned here with Homeland Security.

As far as the Recovery Act is concerned, I guess overall I concur

with some of the statements that have been made today, that we

are seeing progress here. I can recall last year when we talked

about this particular component, and I think I made the statement

that there had been about $60 million collected, and I think I was

asked, ‘‘do you mean 60 million or 6 billion?’’ And I said, ‘‘No, it’s

only 60 million.’’ So progress have been made, but again, there’s a

lot more that I think that can be done in this particular area.

There are a lot of techniques, procedures that are out there that

we call best practices. One of the things that I always like to highlight at these hearings is that we at GAO have put together a publication called Strategies for Addressing Improper Payments. It’s

got a lot of techniques in there. We always suggest that the agencies take a look at this. I know that CFO PCIE subgroups that’s

working on improper payments have mentioned it in some of their

guidance. We encourage people to continue to look at that and try

to make sure that they’re following those best practices and trying

to address this issue as far as recovering the money if it were possible.

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Mr. PLATTS. I agree, again, going from 60, and roughly 450 or so

million, heading in the right direction. The higher we get that

number, the better in the sense that we are recovering more, but

ultimately we want it to be lower because we are not making the

improper payments to begin with. So that sort of goes to the whole

internal control issue. I do want to touch on that with Dr. Combs.

Before I do, Secretary, I have given you and Mr. Hill, a breather

here while I was working with GAO and OMB.

Mr. HILL. We’re good with that. [Laughter.]

Mr. PLATTS. I do want to touch one issue that the ranking member, he is going to markup, the gentleman from New York, Mr.

Towns was hoping to get here, but they have a lot of votes in committee, so he has been detailed. But he did have one issue he wanted to be addressed specifically with you, with the claims processor

or other contractors who are used by Medicare in the payment

process. In what fashion are they specifically responsible for the accuracy of the payments that are passed through them, and should

it be strengthened in their level of responsibility as a processor to

verify the information?

Mr. HILL. We absolutely think it should be, you know, accountability should go right down to the folks who are processing the

claims. I think it’s fairs to say that the Medicare Modernization Act

has provided us a real robust set of tools to make sure that accountability is flowing through down to the FIs and the carriers,

fiscal intermediaries and carriers we call them, who process the

claims.

Prior to the MMA, the contracts that we had with these entities

were an anachronism of the enactment of the Medicare statute.

They were very odd in the contracting world. We had very limited

flexibility to actually hold those contractors accountable for how

well they process claims or how well they did a lot of something.

They were cost based, very difficult to get rid of the contractors.

The MMA gave us the authority to contract with these entities

just as any other contract, under FAR authority, where we can

hold them accountable in any number of ways to accomplish the

work for the Medicare beneficiaries that they do. And one of the

ways that we are specifically going to hold them accountable is to

incorporate in their performance metrics on a go-forward basis how

well they do at reducing error rates.

As Secretary Johnson said, beginning in 1996 we measured error

rates at a national rate. Beginning in 2003 we were actually able

to disaggregate that national rate to specific carriers and FIs. So

now I can say for New York or for Pennsylvania or for Tennessee,

what the carrier or the FI for that State, how well they do in processing those claims. It wasn’t until, though, the MMA was passed

and we had this new contracting authority that actually could say

to a contractor, ‘‘Unless you get that rate down or do something to

keep it stable, you know, we’re going to take some action.’’ Now we

have the ability to either build in as part of a fee pool, use it as

part of a competitive range determination on a go-forward basis to

how well or who we are going to contract with, to say, ‘‘Look, if

you’re doing a good job, you’re going to get a benefit for it. If you’re

not doing a good job, it’s going to look negatively upon you as we

continue to compete these contracts.’’

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Mr. PLATTS. So you basically have built in, going forward, a financial incentive for them to be more dutiful in their reviewing of

the claims.

Mr. HILL. Absolutely.

Mr. PLATTS. That is good to hear, and I am sure the ranking

member will be glad to hear that. With extending that, that is in

Medicare specifically. Again, with Medicaid, it is complicated, and

you obviously don’t have the same program. Is there something you

are looking at, how to try to create that same incentive on the Medicaid side, and is the structure so different that it doesn’t——

Mr. HILL. Their relationship for us is with the States. It’s not

with the—the States have those relationships with contractors, and

I think, you know, in some States where they have fiscal agents,

they do use those sorts of incentives to keep——

Mr. PLATTS. But it is really a State decision.

Mr. HILL. But it’s a State decision, and, you know, our incentives

or disincentives would apply to States to keep their rates down. I

think that becomes complicated on a whole bunch of different levels.

Mr. PLATTS. Thank you.

The GAO has been working with the State programs as far as

a set of recommendations, and, Mr. Williams, if you wanted to kind

of walk through your recommendations that you have supplied to

OMB, and how to assist the State-Federal partnership programs to

reduce improper payments. If you want to kind of give a capsule

summary of those recommendations.

And then Dr. Combs and Secretary Johnson, if there are specific,

you know, your thoughts on the recommendations that have come

forward and kind of where they stand, that would be great.

Mr. Williams, you want to start?

Mr. WILLIAMS. Yes, a quick synopsis. You basically asked us to

take a look at what the States are doing in this particular area,

given the fact that out of the $2 trillion budget, about $400 billion

each year is going to the States to administer Federal programs.

So we wanted to see what was happening on that side of the equation because there is some responsibility on the State parts also to

make sure that the money is making it to the ultimate recipient.

We interviewed various people. One of the things that we found

in looking at this is that there were basically only two programs

nationwide in which there was a statutory requirement that improper payment information be reported. One was the food stamp

program. The other was the Department of Labor, the unemployment insurance program.

We found that in the various States, the States were actually

using some of the tools that we’ve talked about today, and doing

risk assessment and other techniques in an effort to recover improper payments.

Along the lines of what we’re recommending is that we found

that OMB had put together some guidance, and we had a couple

of recommendations to OMB to clarify a couple of components of

the recommendations. For example, the clearly define what stated

minutes their programs represented, and a couple other areas that

we talked about.

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In addition to that, we also had a recommendation that the Federal agencies work closely to communicate with the States and

work with the States on how to go about doing the risk assessments and estimating improper payments.

And, finally, we had a recommendation that focused on point

that I had made earlier, and that is, OMB, Federal agencies and

the States need to work together in every way possible, and get together to make sure that the lines of communications are open so

that best practices are shared among organizations. So these are

some things that we recommended that we think will improve the

lines of communications and help the States become a stronger,

larger partner in this effort of addressing the improper payments

problem.

Mr. PLATTS. And would an example of that be that best practices

like the TANF pilot program and new hires match?

Mr. WILLIAMS. That’s correct.

Mr. PLATTS. As we see that expand to 31 and eventually, hopefully, all 50, be the type thing you are looking for?

Mr. WILLIAMS. Exactly. When you’ve got best practices like that,

you want to expand it in every way possible until you’ve hit the entire universe.

Mr. PLATTS. Dr. Combs.

Ms. COMBS. Yes. We have concurred with the GAO recommendations, each and every one of them, and thoroughly appreciated

what information we were able to get from that. We also believe,

yes, there was need for some clarity on some specific areas, and one

of the best practices that we have not talked about here today was

the State of Tennessee, in one of their highway project as well that

was done. But again, as Mr. Williams just said, getting those best

practices out there will encourage others to do the same.

We are very committed to that. In fact, I personally met with

some finance folks when they were in town for a conference, who

are representatives in the States, their respective States, to hear

from them and just hear if there are some things that we’re not

doing that we could do to reach out to them and to form better alliances and better relationships, and we intend to do quite a bit of

followup with that, and having more frequent communications between our offices and them to help share those best practices.

I think Secretary Johnson mentioned a marketing effort a while

ago in his testimony, and that’s a lot of what this sharing those

best practices is all about. So we concur with the GAO recommendations.

Mr. PLATTS. Secretary?

Mr. JOHNSON. Two things come to mind. We have, for example,

in TANF program, set up a Web site where States can enter their

best practices and share, which would include these data matches.

That’s one thing that comes to mind.

The other thing is this so-called A–133 single audit, where we

ask that there be a single audit at States, and trying to expand the

use of that a little bit, where we take specific programs and ask

that in any given year that the auditors concentrate on that program to try to give us a better error rate and improper payment

rate, through that means. So we’ve been experimenting with that

with some States and finding some success. Now again, not everyVerDate 11-MAY-2000 10:38 Jun 16, 2008 Jkt 000000 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 C:\DOCS\41851.TXT KATIE PsN: KATIE
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one is going to do it and we’re looking at ways to market that, if

you will.

Mr. PLATTS. I had the pleasure of speaking last year, and I forget

the name of the group. I will say the American Association of Financial Managers—Association of Government Accountants. I was

close—nor really. But I was there briefly, came in, got a chance to

address and then had to come right back to D.C. But is there outreach at those settings? I kind of look at that as a continuing ed.

opportunity where these best practices are shared, to encourage—

because I know the brief time I was there I met a number of officials from Illinois, a number of States that were there at that national conference. Is there a sharing of this best—is that an example of the marketing that is done?

Mr. JOHNSON. That would be a good example. We try a lot of

areas to do that. NCSL, the Secretary has spoken there, every opportunity. But we can do a lot more. I mean we’re just kind of just

getting the vision of what you can do through those kind of organizations, so I really think there’s a lot more to be done.

Mr. PLATTS. I would think the environment is perfect. With the

Deficit Reduction Act, a lot of what we did on the Medicaid side

was actually—it was the National Government Association’s recommendations, bipartisan, although you would never believe it by

the criticism level at those of us who supported it, but it was using

the knowledge of the State officials to say, here is the flexibility we

need to ensure the integrity of the program so we can truly help

those who need help, as opposed to those who want help but don’t

necessarily need it. So that sharing of information I think is so important.

And having participated in NCSL, and ALEC myself in my State

House days, I know that from a law-making perspective those are

very helpful forums to learn what works already, rather than reinventing the wheel.

Mr. WILLIAMS. Mr. Chairman, I would like to add, given that my

boss is the former president of AGAA, he——

Mr. PLATTS. Don’t tell him I got the name from him. [Laughter.]

Mr. WILLIAMS. I will not. The Association has put on workshops

over the last year that focus specifically on improper payments

issue, how to go about—in the Northern Virginia chapter, I should

say, there’s been presentations there, workshops on how to go

about doing sampling and other procedures as far as addressing

the Improper Payments Act.

Mr. PLATTS. I am glad to hear it, because, again, all the various

avenues when—hopefully the States won’t need to be coerced but

will see the numbers and the benefits of doing it.

As you move forward with the marketing and the outreach, certainly if there are specific legislative hurdles that we needed to address, like MMA address with Medicare that we should be looking

at, we welcome that feedback in these programs as you move forward, especially with the various HHS programs as you are moving

forward with the plans, if there is additional authority, we are glad

to hear, certainly in that case, energy and commerce with Medicaid, and we want to give you the tools to do what we are asking

you to do.

Ms. COMBS. Mr. Chairman, before you leave that subject.

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Mr. PLATTS. Yes?

Ms. COMBS. I will say that the organization that you mentioned

has been very effective in an outreach. They ask our office very frequently to serve on panels and to serve as keynote speakers, so it

is an effective organization for getting our message out there. We

have taken full advantage of that whenever we possibly can. People

on my staff have served on panels. We’ve had people who have

helped because their organization acts to work through specific programs with them, and that specifically was the group that was in

town, and got some State people together. So those organizations

are very, very helpful and effective, and I appreciate their partnership as well.

Mr. PLATTS. Glad to hear it.

I actually have one final question, Mr. Williams. I just wanted—

if I made my notes right when we were talking about DOD with

Mr. Duncan. Was I correct that you said of 38 programs at DOD,

they said just three were susceptible?

Mr. WILLIAMS. Of all of the programs at DOD, there were three

programs that reported. That was up one from last year to the best

of my memory. In 2004 there was Military Health and there was

Military Benefits. In 2005, Military Pay was added. But, again, this

is another program that if you look at the information that is reported in the PAR report, DOD makes a point of pointing out that

these are programs that we are reporting because OMB has mandated that we report these numbers because they are former A–11

programs. But we do not believe that these programs have met the

21⁄2 percent criteria, but we are reporting it because we have been

mandated to do it by OMB. And those are the three programs that

I believe we saw in the 2005 report, with no pay being added.

Mr. PLATTS. Out of the entire department, right?

Mr. WILLIAMS. Yes, this is department wide, as far as improper

payment reporting.

Mr. PLATTS. So in a department that is spending half a trillion

dollars, they believe only three programs have susceptibility and

they really don’t believe that. They are only reporting it

because——

Mr. WILLIAMS. That’s correct, because it’s being mandated, exactly.

Ms. COMBS. Let me just also add that they also are reporting on

their contract payments as well, and you got to remember, most of

what they do there is contract payment, so they’re reported on—

they reviewed something like 223——

Mr. PLATTS. Right, on their recovery audits. That is a good point.

I stand——

Ms. COMBS. In all fairness.

Mr. PLATTS [continuing]. Partially corrected.

Ms. COMBS. We’ll give some credit when we can.

Mr. PLATTS. So maybe in the 2005 year they were probably at

about $450 billion, and to about half they actually did review

through recovery audits, and—I mean their total budget about

$450 billion, and they recovered $418 million.

Mr. WILLIAMS. That is correct.

Mr. PLATTS. So it is larger than——

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Mr. WILLIAMS. It’s 473 is the amount that was identified for recovery, and about 1481⁄2 was actually recovered in 2005.

Mr. PLATTS. OK.

Ms. COMBS. I think the other point to make on this, that the outlays, they’re tracking and reporting on about 71 percent of their

outlays.

Mr. PLATTS. Right. And so about 30 percent they are not reporting on currently, but they don’t really believe that they have any

program susceptible——

Mr. WILLIAMS. Significant.

Mr. PLATTS. Yes. Of significant improper payments.

Mr. WILLIAMS. Yes. But this is an organization in which we have

financial management at the Department on our high-risk series,

and this is another agency at GAO that I have for responsibility

for from the financial management arena. And we have, over the

years, reported on various material weaknesses. Again, I get back

to what I’ve testified is the root cause for improper payments in

various areas.

And I guess the final point that I would also like to add, while

we do have these recovery audits, this is good to have in the overall

scheme of things, but with the weaknesses in the agency’s inability

to have audited financial statements in their reportable conditions,

I’ve always pointed out that in this particular exercise, you want

to make sure that you have—and I think it’s been said earlier

today—you want to make sure that you have those control techniques that prevent the horse from getting out of the barn in the

first place, so to speak, and you want to make sure that you have

a lot of those, given some of the departments that we’ve reported

on in the past.

Mr. PLATTS. A point well taken, and it goes to the Secretary’s

comment earlier that we want to get to where we are not worried

about recovering, but just preventing. And that is an issue we talk

about a lot, the internal control issue, and I know they will be reporting here in the next couple months, in June, I guess, with the

requirements.

Ms. COMBS. On their internal controls.

Mr. PLATTS. Right, on their internal controls, which hopefully

they will translate to even more effectiveness on improper payments.

Ms. COMBS. Oh, absolutely. They are going to track hand-inhand.

Mr. PLATTS. Great. Mr. Williams, you have DOD, you have DHS.

Are you able to sleep at night? [Laughter.]

You have to be worried about all those dollars, right?

Mr. WILLIAMS. That’s correct.

Mr. PLATTS. I want to thank all four of our witnesses and your

staffs for your assistance in preparing for the hearing, your written

testimony, your testimony here today and your answers to the

questions. I sincerely appreciate the importance of the partnership

between OMB, the departments, GAO, Congress, all of us who are

after the same thing, which is ensuring that we spend the taxpayer

moneys wisely, efficiently and responsibly, and certainly that is

what you and your staffs are dedicated to, and we appreciate those

good faith efforts, and wish you success, especially at HHS. You

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have some huge challenges and especially in the State administered programs. We want to see you succeed, and any way that we

can be of assistance as a committee, please let us know. But again,

thank you.

We will keep the hearing open for 10 days for any additional information that needs to be submitted. Otherwise, the hearing

stands adjourned.

[Whereupon, at 3:58 p.m., the subcommittee was adjourned.]

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