a

GAO

United States Government Accountability Office

Report to the Chairman, Subcommittee 

on Government Management, Finance, 

and Accountability, Committee on 

Government Reform, House of 

Representatives

April 2006 IMPROPER 

PAYMENTS

Federal and State 

Coordination Needed 

to Report National 

Improper Payment 

Estimates on Federal 

Programs

GAO-06-347
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

IMPROPER PAYMENTS

Federal and State Coordination Needed to 

Report National Improper Payment 

Estimates on Federal Programs 

Highlights of GAO-06-347, a report to the 

Chairman, Subcommittee on Government 

Management, Finance, and Accountability,

Committee on Government Reform, 

House of Representatives

Over the past several years, GAO 

has reported that federal agencies 

are not well positioned to meet 

requirements of the Improper 

Payments Information Act of 2002

(IPIA). For fiscal year 2005, 

estimated improper payments 

exceeded $38 billion but did not 

include some of the highest risk 

programs, such as Medicaid with 

outlays exceeding $181 billion for 

fiscal year 2005. Overall, stateadministered programs and other

nonfederal entities receive over 

$400 billion annually in federal 

funds. Thus, federal agencies and 

states share responsibility for the 

prudent use of these funds. GAO

was asked to determine actions 

taken at the state level to help

federal agencies estimate improper

payments for state-administered

federal programs and assistance 

needed from the federal level to 

support the respective federal 

agencies’ implementation of IPIA. 

What GAO Recommends

GAO is making four

recommendations to the Office of

Management and Budget (OMB) to 

better assist federal agencies’ 

implementation of IPIA

requirements for stateadministered federal programs,

including determining states’ role

in assisting federal agencies to

report national improper payment

estimates on federal programs. 

OMB agreed with GAO’s

recommendations. 

To date, states have been subject to limited requirements to assist federal 

agencies in estimating improper payments. For the 25 major stateadministered federal programs surveyed, only 2 programs—the Food Stamp 

and Unemployment Insurance programs—have federal requirements for all 

states to estimate improper payments. A limited number of federal agencies 

are conducting pilots to estimate improper payments in other programs, but 

state participation is voluntary. Where no federal requirement or pilot is in 

place, 5 programs involving 11 states had estimated improper payments 

during fiscal years 2003 or 2004. 

Number of States in GAO Survey Estimating Improper Payments 

0

10

20

30

40

50

State 

initiative

Federal

pilot

Federally

required

Number of states

Source: GAO analysis.

Type of initiative

51

29

11

Note: The 51 states are the 50 states and the District of Columbia.

States have a fundamental responsibility to ensure the proper administration 

of federal awards by using sound management practices and maintaining 

internal controls. To do this, states reported using a variety of techniques to 

prevent and detect improper payments. All states, except for one, responded 

that they use computer-related techniques, such as fraud and abuse 

detection programs or data matching, to prevent or detect improper 

payments. Other techniques selected states used included performing 

statewide assessments and recovery auditing methods. States also reported 

receiving federal incentives and penalties to assist with reducing improper 

payments, although most of these actions related to the Food Stamp 

Program, which gives incentives and penalties to states having error rates 

below and above the program’s national error rate. 

Of the 240 state program officials surveyed, 100 identified tools that would 

be needed to estimate improper payments and help federal agencies meet 

various IPIA requirements, including guidance on estimating improper 

payments and performing risk assessments. OMB has begun planning for 

increased state involvement in measuring and reporting improper payments 

via the Erroneous and Improper Payments Workgroup and IPIA guidance. 

However, much work remains at the federal level to identify and estimate 

improper payments for state-administered federal programs, including 

determining the nature and extent of states’ involvement to assist federal 

agencies with IPIA reporting requirements. 

www.gao.gov/cgi-bin/getrpt?GAO-06-347.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact McCoy 

Williams at (202) 512-9095 or 

williamsm1@gao.gov. 
Page i GAO-06-347 Improper Payments

Contents

Letter 1

Results in Brief 3

Background 6

Estimating Improper Payments at the State Level Is Limited 8

States Reported Using Various Techniques to Detect, Prevent, or 

Reduce Improper Payments 15

Federal Action Needed to Help States Report Improper Payment 

Information 23

Conclusions 27

Recommendations for Executive Action 28

Agency Comments 29

Appendixes

Appendix I: Objectives, Scope, and Methodology 30

Appendix II: States and Programs Included in Our Review 36

Appendix III: Food Stamp Quality Control System 43

Appendix IV: UI Benefit Accuracy Measurement and National Directory of 

New Hires Database 51

Appendix V: Highway Planning and Construction Pilot to Estimate 

Improper Payments 57

Appendix VI: Medicaid Payment Accuracy and Payment Error Rate 

Measurement Project 60

Appendix VII: Comments from the Office of Management and Budget 66

Appendix VIII: GAO Contact and Staff Acknowledgments 69

Related GAO Products 70

Tables Table 1: Program Use of Computer-Related Techniques 17

Table 2: Amount of Improper Payments Collected through State 

Recovery Auditing Efforts 20

Table 3: Number of States for Which Each of the 25 Programs Was 

Defined as Major 32

Table 4: Number of Major Programs in Each State 33

Table 5: Food Stamp Improper Payment Amounts by State for 

Fiscal Years 2003 and 2004 45
Contents

Page ii GAO-06-347 Improper Payments

Table 6: Summary of Factors Contributing to Declining Food Stamp 

Improper Payment Error Rates and Amounts 49

Table 7: UI Overpayments and Underpayments by State for 

Calendar Years 2003 and 2004 53

Table 8: Number of States Participating in CMS’s Medicaid Pilots to 

Estimate Improper Payments 60

Table 9: Timeline of CMS Regulations and Initiatives to Estimate 

Medicaid Improper Payments 63

Figures Figure 1: Number of States in Our Survey Estimating Improper 

Payments 9

Figure 2: Food Stamp National Payment Error Rate, Fiscal Years 

1999-2004 47

Figure 3: UI Overpayment National Error Rates, Calendar Years 

1988-2004 52

Figure 4: Example of Test Procedures for Asphalt 58

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Page 1 GAO-06-347 Improper Payments

United States Government Accountability Office

Washington, D.C. 20548

A

April 14, 2006 Letr

The Honorable Todd R. Platts

Chairman

Subcommittee on Government Management, Finance, 

and Accountability

Committee on Government Reform

House of Representatives

Dear Mr. Chairman:

Each year federal agencies expend more than $2 trillion through thousands 

of programs and activities to address the needs of the American people. Of 

this amount, over $400 billion in federal funds are distributed to states and 

other nonfederal entities. These funds, typically issued through grants, are 

used to implement over 1,000 individual programs from 26 federal grantmaking agencies.1

 As the steward of taxpayer dollars, the federal 

government is accountable for how its agencies and grantees spend this 

money, including the safeguarding of federal funds from improper 

payments. Grantees are also responsible for ensuring that funds are used 

for the purposes for which the funds were provided. 

Our work over the past several years has demonstrated that improper 

payments are a significant and widespread problem in the federal 

government, with agencies reporting improper payments over $38 billion in 

their fiscal year 2005 performance and accountability reports (PAR). This 

estimate, however, does not include all programs. In our review of 

agencies’ fiscal year 2005 PARs,2

 we noted that some agencies still have not 

instituted systematic methods of reviewing all programs and activities, 

have not identified all programs susceptible to significant improper 

payments, or have not annually estimated improper payments for their 

high-risk programs. For example, seven state-administered3

 federal 

1

Federal funds are distributed through a variety of awards, including grants and cooperative 

agreements.

2

For GAO’s audit report on the U.S. government’s consolidated financial statements for 

fiscal year 2005, see Department of the Treasury, Fiscal Year 2005 Financial Report of the 

United States Government (Washington, D.C.: December 2005), 152-153, which can be 

found on GAO’s Internet site at www.gao.gov. 

3

For report purposes, the term state-administered indicates federal programs that are 

managed on a day-to-day basis at the state level to carry out program objectives. 
Page 2 GAO-06-347 Improper Payments

programs with outlays totaling about $228 billion still have not been 

annually estimated for improper payments, even though the Office of 

Management and Budget (OMB) required them to report such information 

about 4 years ago in their fiscal year 2003 budget submissions. 

The Improper Payments Information Act of 2002 (IPIA)4 prompted all 

executive branch agencies to systematically address improper payment 

activity annually. While states do not have a direct role in meeting IPIA 

requirements, they do play an important role in federal fund stewardship. 

In particular, states are responsible for the proper administration of federal 

awards through using sound management practices and maintaining 

internal control.5

 Payments, as defined under IPIA, include payments made 

by a governmental or other organization administering a federal program or 

activity. An improper payment is defined by IPIA as any payment that 

should not have been made or that was made in an incorrect amount, a 

duplicate payment, and payment for services not rendered or rendered to 

ineligible beneficiaries. OMB’s implementing guidance for IPIA6

 requires 

that estimates of improper payments, and if applicable, a corrective action 

report, be included in all federal executive branch agencies’ PARs 

beginning with fiscal year 2004. 

Because of the Subcommittee’s continued interest in addressing the 

governmentwide improper payments issue, you asked us to determine 

(1) what actions are being taken by states to assist federal agencies in 

estimating improper payments; (2) what techniques related to detecting, 

preventing, or reducing improper payments have states employed to ensure 

the proper administration of federal awards; and (3) what assistance can be 

provided by OMB that state program administrators would find helpful in 

supporting the respective federal agencies with the implementation of 

IPIA. 

To identify states’ actions and assistance needed, we conducted a survey of 

all 50 states and the District of Columbia regarding actions to estimate 

4

Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002).

5

OMB Circular No. A-87, Cost Principles for State, Local, and Indian Tribal Governments. 

See also OMB Circular No. A-102, Grants and Cooperative Agreements with State and 

Local Governments, and OMB Circular No. A-133, Audits of States, Local Governments, 

and Non-Profit Organizations, and the related A-133 Compliance Supplement.

6

OMB Memorandum M-03-13, “Improper Payments Information Act of 2002 (Public Law 107-

300),” May 21, 2003.
Page 3 GAO-06-347 Improper Payments

improper payments for state-administered federal programs for fiscal years 

2003 and 2004. Statewide surveys were completed by state officials with 

knowledge of statewide administration of operations. We received 50 of the 

517

 statewide surveys for a response rate of 98 percent. In addition, 

program-specific surveys were completed by state program administrators 

or directors for the major programs in each state. We received 227 of 240 

program-specific surveys for a response rate of 95 percent. The high 

response rates for the variety of state-administered programs provided a 

wide range of survey responses regarding actions to address improper 

payments. 

For the purposes of this review, we defined major programs as those stateadministered programs that expended the largest amounts of federal funds 

in decreasing order, which in aggregate covered at least 60 percent of the 

total federal portion of state-administered expenditures in each state. 

Together, the states identified 25 programs as major (see table 3 in app. I). 

The 5 most common major programs were Medicaid (all 51 states), 

Highway Planning and Construction (44 states), Food Stamp (36 states), 

Temporary Assistance for Needy Families (28 states), and Unemployment 

Insurance (26 states). As shown in table 4 in appendix I, the number of 

major programs varied from 1 to 12 programs per state, and in total, added 

up to the 240 program-specific surveys we sent. We also visited selected 

states that had ongoing initiatives already in place to estimate improper 

payments for certain programs, conducted interviews with OMB and other 

federal officials as well as state officials regarding state efforts to estimate 

improper payments, and reviewed federal agencies’ fiscal year 2005 PARs 

and prior GAO and office of inspector general (OIG) reports. We conducted 

our work from April 2005 through December 2005 in accordance with 

generally accepted government auditing standards. See appendix I for 

more details on our scope and methodology.

Results in Brief To date, states have been subject to limited requirements to assist federal 

agencies in estimating improper payments. For the 25 major programs 

surveyed, only 2 programs—the Department of Agriculture’s (USDA) Food 

Stamp Program and the Department of Labor’s (Labor) Unemployment 

Insurance (UI) Program—have federal requirements for all states to 

estimate improper payments. A limited number of federal agencies are 

7

For reporting purposes, we used 51 when quantifying the universe of states, which 

comprises the 50 states and the District of Columbia.
Page 4 GAO-06-347 Improper Payments

conducting pilots to estimate improper payments for certain stateadministered programs, but state participation is voluntary. Where no 

federal requirement or pilot is in place, 11 states estimated improper 

payments involving 5 programs during fiscal years 2003 or 2004. 

States have a fundamental responsibility to ensure the proper 

administration of federal awards by using sound management practices 

and maintaining internal controls. To ensure proper administration of 

federal funds, states reported using a variety of techniques to prevent, 

detect, and reduce improper payments. All states, except for 1, responded 

that they use computer-related techniques, such as fraud and abuse 

detection programs or data matching for this purpose. Twenty-one of the 51 

states in our survey responded that they have performed a statewide 

assessment of their programs to identify those that may be at risk for 

improper payments. 

In addition, 15 states reported that they conducted recovery audits in fiscal 

year 2003, fiscal year 2004, or both, collectively recovering over 

$335 million for the 2 fiscal years. Thirty-two states reported receiving 

federal incentives, such as enhanced funding or reduced reporting 

requirements, for reducing improper payments, and 17 states reported 

receiving federal penalties, such as decreased funding and increased 

reporting requirements, for failing to reduce improper payments. Most of 

these actions related to the Food Stamp Program, which applies incentives 

and penalties to states having error rates below and above the national 

error rate, respectively. 

Of the 227 program surveys received, 100 of the state program 

administrators or their designees responded that guidance or resources 

from OMB, cognizant federal agencies, or both were needed if the states 

were to assist the federal agencies in meeting the requirements of IPIA. 

Specifically, state program officials requested guidance on estimating 

improper payments and performing risk assessments. Selected states also 

asked for additional funding to subsidize efforts, if they were required to 

estimate improper payments; requested that OMB and federal agencies 

share best practices and available guidance; and requested that their input 

be considered prior to any state IPIA program reporting requirement taking 

effect. 

OMB has recognized the important role that states have in assisting federal 

agencies to meet the requirements of IPIA. In August 2005, OMB issued 

Circular No. A-136, Financial Reporting Requirements, to consolidate, 
Page 5 GAO-06-347 Improper Payments

clarify, and update existing guidance relating to agency and govermentwide 

financial reporting. Among other things, OMB specifically requires federal 

agencies with grant-making programs to report in their fiscal year 2005 

PARs accomplishments in the area of funds stewardship beyond the 

primary recipient8

 and the status of projects under way and results of any 

reviews. Our review of the fiscal year 2005 PARs showed that in general 

federal agencies either did not report on their grant-making activities, did 

not clearly identify grant programs, or did not address fund stewardship 

beyond the primary recipient. 

OMB has continued to conduct its improper payments work through the 

Chief Financial Officers Council (CFOC) and President’s Council on 

Integrity and Efficiency’s (PCIE) Erroneous and Improper Payments 

Workgroup. The workgroup, consisting of federal agency chief financial 

officers, OMB officials, and inspectors general, periodically convenes to 

discuss and develop best practices and other methods to reduce or 

eliminate improper payments. It has issued reports and other products to 

CFOC/PCIE, reflecting workgroup deliberations and determinations. One 

of these products was a report on initial considerations regarding state and 

grantee involvement in the process of developing methodologies for federal 

agencies to estimate improper payments. 

In November 2005, OMB issued draft revisions to its IPIA implementing 

guidance. This implementing guidance, together with recovery auditing 

guidance, is to be consolidated into future Parts I and II of Appendix C to 

OMB Circular No. A-123, Management’s Responsibility for Internal 

Controls (Dec. 21, 2004).9

 While this guidance begins the process to further 

address the complexities related to reporting improper payment 

information for federally funded, state-administered programs, additional 

enhancements could be made that address how federal agencies define 

state-administered programs and the methodology to be employed for 

generating a national estimate. Specifically, we found that the proposed 

changes do not clearly define the term state-administered programs. 

8

The primary recipient is the state or other entity that receives funding directly from the 

federal government. Past the primary recipient would be funding that flows from the state 

or other entity to a beneficiary or subrecipient.

9

OMB’s improper payment guidance is cited in footnote 6 of this report. OMB’s recovery 

auditing guidance refers to two OMB memorandums—OMB Memorandum M-03-07, 

“Programs to Identify and Recover Erroneous Payments to Contractors,” January 16, 2003, 

and OMB Memorandum M-03-12, “Allowability of Contingency Fee Contracts for Recovery 

Audits,” May 8, 2003.
Page 6 GAO-06-347 Improper Payments

Without a clear definition, OMB is at risk of receiving inconsistent 

improper payment reports because agencies could define programs 

differently. In addition, we noted that the draft guidance did not provide 

basic criteria, such as the nature and extent of data and documentation that 

agencies should consider when developing a plan or methodology to 

calculate a national improper payment error rate for these stateadministered programs. 

We are making four recommendations to OMB to help ensure successful 

implementation of IPIA requirements for federally funded, stateadministered programs. Specifically, we recommend that OMB (1) clearly 

define in its IPIA guidance the term state-administered programs so that 

federal agencies can consistently identify all such programs; (2) provide 

criteria in its IPIA guidance that address the nature and extent of data and 

documentation needs to calculate a national improper payment estimate; 

(3) communicate and make available to states guidance on conducting risk 

assessments and estimating improper payments for federally funded, stateadministered programs; and (4) share ideas, concerns, and best practices 

with federal agencies and states regarding improper payment reporting 

requirements for these programs. 

In commenting on a draft of this report, OMB agreed with our 

recommendations and highlighted several initiatives under way to ensure 

that accurate improper payment rates can be generated without creating an 

undue cost and burden on federal agencies or state partners that manage 

federally funded programs. OMB also provided technical comments that 

we incorporated, as appropriate. OMB’s written comments are reprinted in 

appendix VII.

Background In November 2002, the Congress passed IPIA. The major objective of IPIA 

is to enhance the accuracy and integrity of federal payments. The law 

requires executive branch agency heads to annually review all programs 

and activities that they administer, identify those that may be susceptible to 

significant improper payments, and estimate and report annually on the 

amount of improper payments in those programs and activities. IPIA also 

requires the agencies to report annually to the Congress on the actions they 

are taking to reduce erroneous payments for programs for which estimated 

improper payments exceed $10 million. 

IPIA further requires OMB to prescribe guidance for federal agencies to use 

in implementing the act. OMB issued this guidance in Memorandum M-03-
Page 7 GAO-06-347 Improper Payments

13 in May 2003. It requires use of a systematic method to annually review 

and identify those programs and activities that are susceptible to 

significant improper payments. OMB guidance defines significant improper 

payments as annual improper payments in any particular program 

exceeding both 2.5 percent of program payments and $10 million. The OMB 

guidance then requires agencies to estimate the annual amount of improper 

payments using statistically valid techniques for each susceptible program 

or activity. For those agency programs, including state-administered 

programs, determined to be susceptible to significant improper payments 

and with estimated annual improper payments greater than $10 million, 

IPIA and related OMB guidance require each agency to report the results of 

its improper payment efforts. OMB guidance requires the reporting to be in 

the Management Discussion and Analysis section of the agency’s PAR for 

each fiscal year ending on or after September 30, 2004. IPIA requires the 

following information to be reported to the Congress:

• a discussion of the causes of the improper payments identified, actions 

taken to correct those causes, and results of the actions taken to 

address those causes;

• a statement of whether the agency has the information systems and 

other infrastructure it needs to reduce improper payments to minimal 

cost-effective levels;

• if the agency does not have such systems and infrastructure, a 

description of the resources the agency has requested in its most recent 

budget submission to the Congress to obtain the necessary information 

and infrastructure; and

• a description of the steps the agency has taken and plans to take to 

ensure that agency mangers are held accountable for reducing improper 

payments.

OMB’s guidance in M-03-13 requires that three additional things be included 

in the PAR: 

• a discussion of the amount of actual erroneous payments that the 

agency expects to recover and how it will go about recovering them;

• a description of any statutory or regulatory barriers that may limit the 

agency’s corrective actions in reducing improper payments; and
Page 8 GAO-06-347 Improper Payments

• provided the agency has estimated a baseline improper payment rate for 

the program, a target for the program’s future improper payment rate 

that is lower than the agency’s most recent estimated error rate.

In August 2004, OMB established Eliminating Improper Payments as a new 

program-specific initiative in the President’s Management Agenda (PMA). 

The separate improper payments PMA program initiative began in the first 

quarter of fiscal year 2005. Previously, agency efforts related to improper 

payments were tracked along with other financial management activities as 

part of the Improving Financial Performance initiative. The objective of 

establishing a separate initiative for improper payments was to ensure that 

agency managers are held accountable for meeting the goals of IPIA and 

are therefore dedicating the necessary attention and resources to meeting 

IPIA requirements. This program initiative establishes an accountability 

framework for ensuring that federal agencies initiate all necessary financial 

management improvements for addressing this significant and widespread 

problem. Specifically, agencies are to measure their improper payments 

annually, develop improvement targets and corrective actions, and track 

the results annually to ensure the corrective actions are effective.

Estimating Improper 

Payments at the State 

Level Is Limited

State responses to our survey show that the number of state-administered 

federal programs (state programs) estimating improper payments 

significantly decreases if there is no federal requirement to estimate or if 

the states are not participating in a federally administered pilot to estimate. 

For the 25 major programs reviewed for fiscal years 2003 and 2004, all 51 

states estimated improper payments where there was a federal requirement 

to do so. For the federally administered improper payment pilots, the 

number decreased to 29 states. Where there was no federal requirement or 

pilot in place, only 11 states reported estimating improper payments on 

their own initiative, as shown in figure 1. 
Page 9 GAO-06-347 Improper Payments

Figure 1: Number of States in Our Survey Estimating Improper Payments

Note: The 51 states are the 50 states and the District of Columbia.

Programs with Federal 

Requirements

Only 2 of the 25 major programs in our review had federal requirements for 

all the states to annually estimate improper payments—the Food Stamp 

and UI programs. In total, 47 states reported estimating improper payments 

for one or more major programs, which represented 97 program surveys 

for fiscal year 2003, fiscal year 2004, or both. More than half of the reported 

estimates were for the Food Stamp and UI programs.10 Food Stamp and UI 

program outlays expended by the states totaled about $61 billion for fiscal 

year 2004. This constitutes about 15 percent of the total federal funds that 

are estimated to be annually distributed to states and other nonfederal 

entities for redistribution to eligible parties. Both of these programs are 

0

5

10

15

20

25

30

35

40

45

50

State 

initiative

Federal 

pilot

Federally 

required

Number of states

Source: GAO analysis.

Type of initiative

51

29

11

10All 51 states reported an estimate for their Food Stamp and UI programs in fiscal year 2003 

and fiscal year 2004. However, these programs were not identified as major programs for 4 

of the 51 states, thereby limiting to 47 the number of states asked to respond to our survey 

for those programs.
Page 10 GAO-06-347 Improper Payments

benefit programs, have a history of measuring improper payments through 

established systems, and can calculate a national error rate. 

• The purpose of the Food Stamp Program is to help low-income 

individuals and families obtain a more nutritious diet by supplementing 

their incomes with benefits to purchase food. As reported in USDA’s 

fiscal year 2005 PAR, the causes of improper payments in the Food 

Stamp Program include client errors, such as incomplete or inaccurate 

reporting of income, assets, or both by participants at the time of 

certification or by not reporting subsequent changes. Causes can also be 

provider based, such as errors in determining eligibility or benefit 

amounts or delays in action or inaction on client reported changes. The 

Food Stamp quality control system11 measures payment accuracy and 

monitors how accurately states determine food stamp eligibility and 

calculate benefits. USDA reports a rate and dollar amount of estimated 

improper payments for the Food Stamp Program in its annual PAR 

based on the quality control system. In its fiscal year 2005 PAR, USDA 

reported a national improper payment error rate of 5.88 percent, or 

$1.4 billion, for the Food Stamp Program. A national error rate is 

calculated and incentives and penalties are applied to the states that 

have rates lower or higher than the national rate. Recent initiatives 

reported in USDA’s fiscal year 2005 PAR include the agency’s fiscal year 

2004 nationwide implementation of an electronic benefit transfer (EBT) 

system for the delivery of food stamp benefits. The EBT card, which 

replaced paper coupons, creates an electronic record for each 

transaction that makes fraud easier to detect. Other USDA efforts 

include Partner Web, which is an intranet for state food stamp agencies, 

and the National Payment Accuracy Workgroup, which consists of 

representatives from USDA headquarters and regional offices who meet 

to discuss best practice methods and strategies. (See app. III for more 

details on the Food Stamp Program.) 

• The UI Program provides temporary cash benefits to workers who lose 

their jobs through no fault of their own. Labor reported in its fiscal year 

2005 PAR that the principal cause of improper payments was claimants 

who continue to claim benefits despite having returned to work. 

Pursuant to Part 602 of Title 20, Code of Federal Regulations, Labor 

implemented the Benefit Accuracy Measurement system to measure 

11Department of Agriculture, Food and Nutrition Service, FNS Handbook 310: Food Stamp 

Program Quality Control Review Handbook (Alexandria, Va.: October 2003).
Page 11 GAO-06-347 Improper Payments

state payment accuracy in the UI Program.12 Labor also reports a rate 

and dollar amount of estimated improper payments for the UI Program 

in its annual PAR. In its fiscal year 2005 PAR, Labor reported an annual 

error rate of 10.13 percent, or $3.2 billion, for the UI Program. Labor’s 

initiatives to reduce improper payments in the UI Program include 

implementing new cross-matching technologies like the National 

Directory of New Hires database and funding states’ data-sharing efforts 

with federal agencies, such as the Social Security Administration, and 

other state agencies, such as the state departments of motor vehicles. 

Further, Labor is instilling additional performance measures for states 

to detect and recover overpayments of benefits and continuing analyses 

of the causes, costs, and benefits of improper payment prevention or 

establishing recovery operations. (See app. IV for more details on the UI 

Program.) 

Federal Programs with 

Pilots 

Twenty-nine states in our review responded in our surveys or during 

interviews that they voluntarily participated in federally administered pilot 

projects to estimate improper payments. We visited the state participating 

in the Department of Transportation’s (DOT) Highway Planning and 

Construction Program and one of the states participating in the 

Department of Health and Human Services’ (HHS) Medicaid program and 

discussed the states’ efforts to measure improper payments. These pilots 

serve as models for the federal agencies on obtaining improper payment 

information and establishing a methodology for other states to estimate 

improper payments for those programs. Neither of the two pilots was 

sufficiently comprehensive to allow the responsible federal agency to 

project an error rate with statistical precision to all of the states.

• DOT provides funding to the state departments of transportation to 

administer the nation’s federal Highway Planning and Construction 

Program. During our review, DOT had a pilot in place to estimate 

improper payments for two construction projects in Tennessee. The 

sampled transactions reviewed to identify improper payments for these 

two projects were selected from a population of almost $35 million, 

which represented a small portion of DOT’s fiscal year 2005 outlays 

totaling $31 billion for the Highway Planning and Construction 

12GAO, Unemployment Insurance: Increased Focus on Program Integrity Could Reduce 

Billions in Overpayments, GAO-02-697 (Washington, D.C.: July 12, 2002).
Page 12 GAO-06-347 Improper Payments

Program.13 For one of these projects, DOT reported that the estimated 

improper payments amount was statistically insignificant. For the other 

project, DOT reported an improper payment estimate of $111,671. The 

methodology and testing procedures that resulted from DOT’s pilot 

project will be used to extend the methodology nationwide. In its fiscal 

year 2005 PAR, DOT reported a zero-dollar improper payment estimate 

for this program. However, the DOT OIG also reported that detecting 

improper payments for several grant programs, including the Highway 

Planning and Construction Program, was a top management challenge 

for the agency. In particular, the OIG reported that the DOT pilot project 

was too limited and that OIG investigators continue to identify instances 

of improper payments. The OIG cited two improper payment examples 

totaling over $1.3 million, which was reimbursed to DOT as a result of 

OIG investigations. In response, DOT is reorganizing and redesigning its 

procedures to better improve oversight of research agreements. This 

includes creating a new division within DOT’s Office of Acquisition 

Management devoted to the award and administration of cooperative 

agreements. (See app. V for more details on the improper payment pilot 

for the Highway Planning and Construction Program.) 

• In coordination with the states, HHS finances health care services to 

low-income individuals and families through the Medicaid program. 

Medicaid improper payments are caused by medical review, eligibility 

review, or data-processing review errors.14 In fiscal year 2002, HHS 

began a pilot to estimate improper payments for its Medicaid program. 

The number of states voluntarily participating in the pilot has increased 

each year, and in the second year of the pilot, fiscal year 2003, 12 states 

participated. In the third year, fiscal year 2004, 24 states participated in 

the pilot. Because HHS had not fully implemented a statistically valid 

methodology, the agency did not report an improper payment estimate 

for the Medicaid program in its fiscal year 2005 PAR. According to 

13The Highway Planning and Construction Program is also referred to as the Federal-Aid 

Highway Program.

14According to HHS, a medical review error is an error that is determined from a review of 

the medical documentation compared with the information presented on the claim. An 

eligibility review error occurs when a payment for the sampled service or when a capitation 

payment, which is a payment based on a predetermined agreement rather than actual cost, 

covering the date of service is in error in full or in part based on the eligibility status of the 

person as of the proper date of review. A data-processing review error is an error resulting 

in an overpayment or underpayment that could be avoided through the state’s information 

system.
Page 13 GAO-06-347 Improper Payments

agency officials, HHS is in the process of implementing a methodology 

for estimating payment error rates for Medicaid in all states. HHS stated 

that it expects to be fully compliant with the IPIA requirements for the 

Medicaid program by fiscal year 2008. Other initiatives HHS is 

undertaking for the Medicaid program are the hiring of additional staff 

to do prospective reviews of state Medicaid operations and the 

Medicare/Medicaid data match program designed to identify improper 

payments and areas in need of improved payment accuracy. (See app. VI 

for more details on the Medicaid program.)

We identified other improper payment pilot initiatives during our review of 

agencies’ fiscal year 2005 PARs. Specifically, HHS reported that improper 

payment pilots are being conducted for three other state-administered 

programs to assist HHS in its efforts to report a national improper payment 

estimate in the future. For HHS’s State Children’s Health Insurance 

Program (SCHIP), 15 states participated in a payment accuracy 

measurement pilot in fiscal year 2004. The states performed a combination 

of medical, eligibility, or data-processing reviews of claims and applicable 

payments for the period October 1, 2003, to December 31, 2003. Using a 

standard methodology, those states computed a payment accuracy error 

rate for their programs. Based on these results, HHS has adopted a national 

strategy using federal contractors to obtain a national error rate for SCHIP 

with expected implementation in fiscal year 2006. In fiscal year 2007, HHS 

expects to begin measuring SCHIP error rates nationwide for its fee-forservice component. HHS expects to report SCHIP error rates for its fee-forservice, managed care, and eligibility components in its fiscal year 2008 

PAR.

For HHS’s Child Care and Development Fund (CCDF) Program, 11 states 

participated in an improper payment pilot in fiscal year 2004 to assess 

states’ efforts to prevent and reduce improper payments. The states 

worked with HHS to assess the adequacy of state systems, databases, 

policy, and administrative structures. In fiscal year 2005, HHS expanded 

pilot participation to 18 states. HHS also conducted an error rate study in 4 

states to assess those states’ ability to verify information received from 

clients during the initial eligibility process or to establish eligibility 

correctly. In addition, HHS conducted interviews in 5 other states to gather 

information about improper payment activities. HHS reported that it will 

continue to work with states during fiscal year 2006 to identify an 

appropriate strategy for determining estimates of payment errors in the 

CCDF Program.
Page 14 GAO-06-347 Improper Payments

For HHS’s Temporary Assistance for Needy Families (TANF) Program, one 

state participated in a pilot to undergo a more in-depth review of TANF 

expenditures as part of its single audit requirement.15 The objective of the 

pilot was to explore the viability of estimating improper payments in the 

single audit process. Using statistical sampling, the auditors reviewed 208 

cases to test controls. According to HHS, the auditors reported an overall 

case error rate of 20 percent and a payment error rate of 3.9 percent from 

their review of the 208 cases. In addition to this pilot, state-led initiatives 

involving the TANF Program were also under way, as described below. 

State Initiatives to Estimate 

Improper Payments

During our review of survey responses, we also noted that 11 states, on 

their own initiative, were estimating improper payments related to 5 

separate programs for fiscal year 2003, fiscal year 2004, or both. For 

example, 6 of the 11 states indicated in their survey responses that they 

were estimating improper payments for HHS’s TANF Program.16 Among the 

varying methods the 11 states used to estimate amounts, error rates, or 

both were statistically representative samples of payments and findings 

from states’ single audits.17 Other techniques respondents reported using 

included Food Stamp Program quality control reviews to ascertain the 

accuracy of TANF payments, which would be reasonable to do if the 

eligibility requirements of the two programs were similar.

1531 U.S.C. §§ 7501-7507. Under the Single Audit Act, as amended, and implementing 

guidance, independent auditors audit state and local governments and nonprofit 

organizations that expend federal awards to assess, among other things, compliance with 

laws, regulations, and the provisions of contracts or grant agreements material to the 

entities’ major federal programs. Organizations are required to have single audits if they 

expend $500,000 or more in federal funds.

16Prior to fiscal year 1997, there was a federal requirement that each state have a quality 

control system in place for what was then known as the Aid to Families with Dependent 

Children Program, and report on payment accuracy. Concurrent with the restructuring of 

this program, in fiscal year 1997, this requirement was removed, but six states in our survey 

continued the payment accuracy reviews.

17We should note that single audits, by themselves, may lack the level of detail necessary for 

achieving IPIA requirements. Specifically, single audits generally focus on the largest dollars 

in an auditee’s portfolio. Thus, all programs identified as susceptible to improper payments 

at the federal level may not receive extensive coverage under a single audit. Consequently, 

both the depth and level of detail of single audit results are, generally, insufficient to identify 

improper payments, estimate improper payments, or both.
Page 15 GAO-06-347 Improper Payments

States Reported Using 

Various Techniques to 

Detect, Prevent, or 

Reduce Improper 

Payments 

As part of their funds stewardship responsibilities for federal awards, 

states are required to establish and maintain internal control designed to 

provide reasonable assurance that funds are administered in compliance 

with federal laws, regulations, and program requirements. This includes 

maintaining accountability over assets and safeguarding funds against loss 

from unauthorized use or disposition. To ensure proper administration of 

federal funds, states reported using a variety of prepayment and 

postpayment mechanisms. For example, states reported the use of 

computer-related techniques to identify and prevent improper payments as 

well as recovery audits to collect overpayments. In addition, selected 

programs reported that federal incentives and penalties are in place to help 

reduce improper payments. These types of actions contribute to a strong 

internal control structure that helps mitigate the risk and occurrence of 

improper payments. 

Generally, improper payments result from a lack of or an inadequate 

system of internal control, but some result from program design issues. Our 

Standards for Internal Control in the Federal Government18 provides a 

road map for entities to establish control for all aspects of their operations 

and a basis against which entities’ control structures can be evaluated. 

Also, our executive guide on strategies to manage improper payments 

focuses on internal control standards as they relate to reducing improper 

payments.19 The five components of internal control—control environment, 

risk assessment, control activities, information and communication, and 

monitoring—are defined in the executive guide in relation to improper 

payments as follows:

• Control environment—creating a culture of accountability by 

establishing a positive and supportive attitude toward improvement and 

the achievement of established program outcomes.

• Risk assessment—analyzing program operations to determine if risks 

exist and the nature and extent of the risks identified.

18GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

19GAO, Strategies to Manage Improper Payments: Learning From Public and Private 

Sector Organizations, GAO-02-69G (Washington, D.C.: October 2001).
Page 16 GAO-06-347 Improper Payments

• Control activities—taking actions to address identified risk areas and 

help ensure that management’s decisions and plans are carried out and 

program objectives are met.

• Information and communication—using and sharing relevant, reliable, 

and timely financial and nonfinancial information in managing activities 

related to improper payments.

• Monitoring—tracking improvement initiatives over time, and identifying 

additional actions needed to further improve program efficiency and 

effectiveness.

For this engagement, we focused on two of these internal control 

components—risk assessments and control activities, which are discussed 

in more detail in the following sections.

States Frequently Use Risk 

Assessments and ComputerRelated Techniques to 

Prevent or Detect Improper 

Payments

All states except 1 acknowledged using computer-related techniques to 

prevent or detect improper payments, while 21 states reported having 

performed some type of statewide assessments to determine what 

programs are at risk of improper payments. Strong systems of internal 

control provide reasonable assurance that programs are operating as 

intended and are achieving expected outcomes. A key step in the process 

of gaining this assurance is conducting a risk assessment, an activity that 

entails a comprehensive review and analysis of program operations to 

determine where risks exist and what those risks are, and then measuring 

of the potential or actual impact of those risks on program operations. In 

performing a risk assessment, management should consider all significant 

interactions between the entity and other parties, as well as all internal 

factors at both the organizationwide and program levels. 

IPIA requires agencies to review all of their programs to identify those that 

may be susceptible to significant improper payments. Since the programs 

in our review were state administered, we asked the states if they 

performed statewide reviews to assess if their programs may be at risk of 

improper payments. Twenty-one states responded that they had performed 

some type of statewide assessment of their programs. Some of the states’ 

risk assessment processes included internal control assessments, which 

were generally self-assessments performed by the states’ program agencies 

and entities. Two states noted that these self-assessments can be used as a 

tool by state auditors to evaluate weaknesses or to plan work to be 

performed. Regular evaluation of internal control systems is statutorily 
Page 17 GAO-06-347 Improper Payments

required by at least 2 states. Other risk assessment methods states reported 

using included single audits and other audits or reviews performed by state 

auditors or by state agencies. 

Survey respondents also cited using control activities, such as computerrelated techniques, to aid in the detection and prevention of improper 

payments. Computer-related techniques play a significant role not only in 

identifying improper payments, but also in providing data on why these 

payments were made and, in turn, highlighting areas that need 

strengthened prevention controls. The adoption of technology allows 

states to have effective detection techniques to quickly identify and recover 

improper payments. Data sharing, data mining, smart technology, data 

warehousing, and other techniques are powerful internal control tools that 

provide more useful and timely access to information. The use of these 

techniques can achieve potentially significant savings by identifying clientrelated reporting errors and misinformation during the eligibility 

determination process—before payments are made—or by detecting 

improper payments that have been made. Fifty of the 51 states representing 

21 different programs reported in their surveys that they used computerrelated techniques to prevent or detect improper payments. Table 1 shows 

the number of programs that reported using each technique. 

Table 1: Program Use of Computer-Related Techniques

Program

Fraud 

detectiona

Data 

matchingb

Data 

miningc

Smart 

technologyd

Data 

warehousee

Other 

techniquesf

1 Abandoned Mine Land Reclamation 

Program

1 1 0 0 1 0

2 Airport Improvement Program 0 1 0 0 1 0

3 Appalachian Development Highway 

System

0 0 0 0 0 1

4 Child Care and Development Block 

Grant

0 0 1 0 0 1

5 Child Care and Development Fund 1 0 0 0 0 1

6 Capitalization Grants for Drinking Water 

State Revolving Funds

0 0 0 0 0 1

7 Emergency Preparedness Funding 1 1 1 0 1 0

8 Food Stamp Program 18 13 13 1 16 12

9 Foster Care Title IV-E 0 0 0 0 1 1

10 Highway Planning and Construction 10 6 9 1 19 12
Page 18 GAO-06-347 Improper Payments

Source: GAO analysis.

a

Fraud systems. Help detect fraud and abuse in programs. 

b

Data matching. The process in which information from one source is compared with information from 

another to identify any inconsistencies. 

c

Data mining. Offers a tool to review and analyze diverse data for relationships that have not previously 

been discovered. Applying data mining to a data warehouse allows an organization to efficiently query 

the system to identify questionable activities. 

d

Smart technology. Software that analyzes patterns in claim data and feeds the information back into 

the system to identify new patterns.

e

Data warehouse. Stores historical and current data and consist of tables of information that are 

logically grouped together. The warehouse allows program and financial data from different 

nonintegrated systems throughout an organization to be captured and placed in a single database 

where users can query the system for information.

f

Other computer-related techniques. Various.

As table 1 shows, for the state programs that reported using a computerrelated technique, 106 state program administrators reported using some 

sort of fraud detection system. One example is the Transportation Software 

Management Solution, a fraud detection system used by several states for 

the Highway Planning and Construction Program. This software contains a 

Bid Analysis Management System that allows highway agencies to analyze 

bids for collusion. Also, a limited number of states in our survey reported 

using smart technology. For example, the Medicaid Fraud, Abuse and 

Detection System is designed to structure, store, retrieve, and analyze 

management information. It has the ability to detect fraud patterns, and it 

11 Home Investment Partnerships 

Program

0 0 1 0 1 0

12 Medicaid 35 43 42 16 43 23

13 National School Lunch Program 1 1 0 0 3 2

14 Special Education State Grants 1 1 1 0 5 2

15 Special Supplemental Nutrition 

Program for Women, Infants, and 

Children

1 1 1 0 1 0

16 Temporary Assistance for Needy 

Families

13 9 9 2 12 7

17 Technology Transfer 0 0 0 0 1 0

18 Title I Grants to Local Educational 

Agencies

3 3 3 0 7 3

19 Improving Teacher Quality State Grants 0 0 0 0 1 0

20 Unemployment Insurance 21 9 9 2 9 6

21 Federal Transit Formula Grants 0 0 0 0 0 1

Total 106 89 90 22 122 73

(Continued From Previous Page)

 Program

Fraud 

detectiona

Data 

matchingb

Data 

miningc

Smart 

technologyd

Data 

warehousee

Other 

techniquesf
Page 19 GAO-06-347 Improper Payments

works with the Medicaid Management Information System, which contains 

a data warehouse that can be queried for information to be used in a variety 

of analyses. Other techniques include one state’s use of a Web-based 

system that allows National School Lunch Program participants to enter 

monthly claims by site. System checks are in place to ensure that sites do 

not overclaim meals based on days served and eligible students.

States Have Implemented 

Recovery Auditing Efforts 

Recovery auditing is another method that states can use to recoup detected 

improper payments. Recovery auditing focuses on the identification of 

erroneous invoices, discounts offered but not received, improper late 

payment penalties, incorrect shipping costs, and multiple payments for 

single invoices. Recovery auditing can be conducted in-house or by 

recovery audit firms. 

Section 831 of the National Defense Authorization Act for Fiscal Year 200220

contains a provision that requires all executive branch agencies entering 

into contracts with a total value exceeding $500 million in a fiscal year to 

have cost-effective programs for identifying errors in paying contractors 

and for recovering amounts erroneously paid. The legislation further states 

that a required element of such a program is the use of recovery audits and 

recovery activities. The law authorizes federal agencies to retain recovered 

funds to cover in-house administrative costs as well as to pay contractors, 

such as collection agencies. OMB guidance21 suggests that federal agencies 

awarding grants may extend their recovery audit programs to cover 

significant contract activity by grant recipients (e.g., states). States may 

engage in their own recovery audit programs.

As shown in table 2, based on our review of survey responses, 15 states 

reported conducting recovery audits in fiscal year 2003, fiscal year 2004, or 

both. In fiscal year 2003, states reported recovering over $180 million, 

compared to $155 million for fiscal year 2004. 

20Pub. L. No. 107-107, div. A, title VIII § 831, 115 Stat. 1012, 1186 (Dec. 28, 2001) (codified at 

31 U.S.C. §§ 3561-3567).

21OMB Memorandum M-03-07, “Programs to Identify and Recover Erroneous Payments to 

Contractors,” January 16, 2003.
Page 20 GAO-06-347 Improper Payments

Table 2: Amount of Improper Payments Collected through State Recovery Auditing 

Efforts

Source: GAO analysis.

a

Did not perform a recovery audit in fiscal year 2003.

b

We noted four additional states—Colorado, Connecticut, Kentucky, and Tennessee—that performed 

recovery auditing in fiscal year 2003 or fiscal year 2004; however, the respondents did not report an 

amount for our survey because the information is reported at the state agency level and not reported in 

aggregate at the statewide level. 

In survey responses, states reported using either outside contractors to 

perform recovery audits or establishing in-house fraud and detection units 

to recover improperly paid amounts. One state noted that it passed 

legislation requiring the use of recovery auditors in its state agencies. In 

June 2005, Texas enacted legislation that directs the state’s Comptroller of 

Public Accounts to contract to conduct recovery audits of payments made 

by state agencies to vendors and to recommend improved state agency 

accounting operations.22 The law requires state entities with more than 

$100 million in biennial expenditures to undertake annual recovery 

audits.23 The state expects to recover up to $4.5 million annually starting in 

state fiscal year 2007.24

State Fiscal year 2003 Fiscal year 2004

Delaware $0a $66,397

District of Columbia 13,057,400 15,561,561

Florida 44,354,018 45,142,905

Idaho 10,501,900 10,535,500

Michigan 15,865,807 11,804,269

New Jersey 73,939 37,356

New York 31,656,087 28,693,436

Ohio 21,517,996 14,386,026

Utah 71,285 189,107

Virginia 12,730,919 7,495,281

West Virginia 30,380,716 21,532,950

Total recoveredb $180,210,067 $155,444,788

22TEX. GOV’T CODE ANN. §2115.002 (2005).

23TEX. GOV’T CODE ANN. §2115.003 (2005).

24State of Texas, Legislative Budget Board, Staff Performance Report to the 79th Legislature

(Austin, Tex.: January 2005).
Page 21 GAO-06-347 Improper Payments

Few State-Administered 

Programs Receive 

Incentives or Penalties 

regarding Improper 

Payments

Viewed broadly, agencies have applied limited incentives and penalties for 

encouraging improved state administration to reduce improper payments. 

Incentives and penalties can be helpful to create management reform and 

to ensure adherence to performance standards. The IPIA implementing 

guidance requires that each federal agency report on steps it has taken to 

ensure that agency managers are held accountable for reducing and 

recovering improper payments. When a culture of accountability over 

improper payments is instilled in an organization, everyone in the 

organization, including the managers and day-to-day program operators, 

have an incentive to reduce fraud and errors. Transparency, through public 

communication of performance results, also acts as an incentive for 

agencies to be vigilant in their efforts to address the wasteful spending that 

results from lapses in controls that lead to improper payments. 

In the survey, we asked the state program administrators to identify any 

incentives they have received from the federal government to encourage 

them to reduce improper payments. We also asked them to identify any 

penalties they have received from the federal government for not doing so. 

Thirty-two states reported incentives such as enhanced funding and 

reduced reporting requirements for 5 of the 25 major programs. Most 

incentives were related to the Food Stamp Program, largely because of a 

statutory requirement that USDA assess penalties and provide financial 

incentives to the states. As we previously reported on the Food Stamp 

Program,25 the administration of the quality control process and its system 

of performance bonuses and sanctions is a large motivator of program 

behavior and has assisted in increasing payment accuracy. Examples of 

other incentives identified by the state programs included reduced 

reporting requirements for benefit recipients and additional funding 

received for a fraud and abuse detection system. 

Penalties such as decreased funding, increased reporting, and client 

sanctions were reported by 17 states for four different programs. As with 

incentives, most of the penalties identified related to the Food Stamp 

Program. States can get approval from USDA to reinvest portions of their 

penalties toward corrective actions to reduce the error rate as opposed to 

USDA recovering the penalty from the state; thus the distinction between 

incentives and penalties is somewhat blurred. Our survey results showed 

25GAO, Food Stamp Program: States Have Made Progress Reducing Payment Errors, and 

Further Challenges Remain, GAO-05-245 (Washington, D.C.: May 5, 2005). 
Page 22 GAO-06-347 Improper Payments

that some states believed that being able to reinvest a portion of their food 

stamp penalty toward corrective action plans to improve payment accuracy 

was actually an incentive, while other states considered it a penalty. For 

another program, one state noted in its survey response that it was 

penalized by the federal government for not applying applicable reductions 

to TANF beneficiaries for noncompliance with child support enforcement 

regulations. In lieu of paying a penalty of over $1 million, the state 

submitted a corrective action plan to address the problems.

Certain states perceive limitations in their ability to adequately address 

improper payments. For example, 37 states reported in their survey 

responses that federal legislative and program design barriers hinder their 

ability to detect, prevent, and reduce improper payments for one or more 

programs. Legislative barriers relate to an agency’s ability to take actions to 

reduce improper payments. Program design barriers relate to the 

complexity and variety of programs. 

From our review of survey responses, several state program officials, 

representing multiple programs, reported that they encountered legislative 

barriers related to due process. Specifically, states are not permitted to 

stop or adjust payments until the due process hearing or appeals processes 

are complete, even though they know the payment is improper. For 

example, one state reported that it has a state superior court ruling that 

requires paying UI benefits conditionally under certain circumstances, and 

that the recovery of the paid benefits can only take place once the courts 

have determined the payments were incorrect. Another state program 

response said that lack of authority to mandate the submission of Social 

Security numbers for those applying for benefits was a barrier that limited 

the ability to identify and prevent improper payments. Additionally, 23 state 

programs identified statutory restrictions over the use of certain data as a 

barrier to improved accuracy. For example, three state programs noted that 

because of security policies, they were restricted from accessing and using 

information from the Internal Revenue Service. 

Program design barriers have also contributed to states’ inability to reduce 

improper payments. Generally, states receive broad statutory and 

regulatory program guidelines from the responsible federal agency. States 

then issue state-specific guidelines to manage day-to-day operations, which 

may vary among the states. A few survey respondents indicated that 

inconsistent requirements between programs hindered their ability to 

reduce improper payments. For example, four state programs noted that 

efforts to manage improper payments are hindered because of the different 
Page 23 GAO-06-347 Improper Payments

eligibility requirements among the federal programs that they administer. 

The survey responses of the state programs also indicated that they 

encountered resource barriers, such as lack of funding for additional 

personnel or information technology. For example, one state program 

responded that the lack of funding needed to identify eligible beneficiaries 

through data matching was a barrier. 

Federal Action Needed 

to Help States Report 

Improper Payment 

Information

Minimizing improper payments is often most efficiently and effectively 

achieved through the exchange of relevant, reliable, and timely information 

between individuals and units within an organization and with external 

entities that have oversight and monitoring responsibilities. For stateadministered programs, assistance from the federal agencies and OMB may 

be needed in order for the states and state programs to successfully assist 

the federal agencies in implementing IPIA requirements. The types of 

communication and information that may be necessary at both the state 

and federal levels include (1) a determination of what information is 

needed by managers to meet and support initiatives aimed at reducing 

improper payments; (2) adequate means of communicating with, and 

obtaining information from, external stakeholders that may have a 

significant impact on improper payment initiatives, such as periodic 

meetings with oversight bodies; and (3) working relationships with other 

organizations to share information on improper payments.

Of the 227 state program surveys received, 100 identified one or more areas 

where guidance or resources from the federal government would be 

helpful. OMB can play an important role in encouraging and coordinating 

efforts between the state programs and federal agencies. OMB, as part of 

its responsibilities, develops and implements budget, program, 

management, and regulatory policies. As such, OMB can set the tone at the 

top by creating a general framework and setting expectations for federal 

agencies in meeting the requirements of IPIA. 
Page 24 GAO-06-347 Improper Payments

Selected States Want 

Federal Assistance

Additional resources and guidance would be needed for increased state 

involvement. As noted above, 100 state program officials26 requested 

various tools cited as needed in their efforts to estimate improper 

payments and to help the federal agencies in meeting various IPIA 

requirements, including guidance on estimating improper payments, 

additional funding for staffing and various projects, sharing of best 

practices and available guidance, and guidance on performing risk 

assessments. State programs also indicated that they would want an 

opportunity to comment on any proposed regulations prior to 

implementation that would require state actions to estimate and report 

improper payment information.

In our survey, we asked the state program officials what types of guidance 

and resources from the federal agencies or OMB would be beneficial to 

better estimate improper payments. State program officials identified one 

or more types of guidance or resources that would be helpful to assist the 

federal agencies in meeting the requirements of IPIA. We classified these 

responses into the following areas: 

• Guidance on estimating improper payments. Forty-four of the state 

programs asked for general procedures, program-specific procedures, 

or both for identifying and detecting improper payments, calculating 

error rates, and establishing sampling methodologies. One state 

program suggested that guidance related to training for detecting 

improper payments and on how to design controls to facilitate improper 

payment detection be made available.

• Additional funding. Forty-three of the state programs indicated a need 

for additional funding to train and support the additional staff levels 

they believe would be necessary to estimate improper payments. 

Additional funding also was requested for automation projects. One 

state requested enhanced funding to update its eligibility system to 

include fraud detection. Another state requested additional funding for 

developing an automated Quality Management System to capture data 

from all levels of reviews and programs. 

26Because one or more responses were identified for each of the 100 program surveys, the 

universe of responses related to the types of guidance and resources needed totaled 170. We 

categorized these responses as follows: (1) guidance on estimating improper payments, 

(2) additional funding, (3) sharing of best practices and available guidance, (4) assessing 

risk/risk assessment instruments, (5) recognition of state input, and (6) other.
Page 25 GAO-06-347 Improper Payments

• Sharing of best practices and available guidance. Fifteen of the 

state programs also expressed interest in the creation of groups to 

discuss trends and best practices in improper payment-related areas, 

while other states wanted general information on IPIA and the states’ 

roles.

• Assessing risk/risk assessment instruments. Thirteen of the state 

programs requested procedures for assessing risk of improper 

payments, including items to take into consideration when assessing 

their programs for risk susceptibility. 

• Recognition of state input. Seven of the state programs want an 

opportunity to comment on any proposed regulations prior to 

implementation of any requirements to estimate or report improper 

payment information. For example, one state responded in its survey 

that the state, in coordination with its cognizant federal agency, should 

determine its own plans to detect improper payments. Additionally, 

another state program inquired as to the purpose of involving the states, 

particularly those that have had little occurrence of audit findings, and 

another wanted clarification on what sanctions would be assessed for 

those that identified improper payments. 

• Other guidance and resources. Forty-eight of the state programs 

requested other types of guidance and resources relating to enhancing 

the use of information technology, overcoming legislative barriers, and 

establishing incentives and penalties for subrecipients, among others. 

For example, one state program wanted the creation of a national 

database to track the activity of medical providers that operate in 

multiple states. 

Actions Initiated at the 

Federal Level to Involve 

States in Measuring 

Improper Payments

OMB has continued to conduct its improper payments work through CFOC 

and PCIE’s Erroneous and Improper Payments Workgroup. The workgroup 

periodically convenes to discuss and develop best practices and other 

methods to reduce or eliminate, where possible, improper payments made 

by federal government agencies. It has issued reports and other products to 

CFOC/PCIE, reflecting workgroup deliberations and determinations. OMB 

officials have told us that they have started to draft a plan on developing 

and maintaining partnerships with states to facilitate state’s estimating and 

reporting information to the federal agencies. For federal agencies’ fiscal 

year 2005 PAR reporting, OMB included a new requirement in Circular No. 

A-136, Financial Reporting Requirements, that federal agencies were to 
Page 26 GAO-06-347 Improper Payments

report on their actions and results at the grantee level. However, based on 

our review of selected federal agencies’ fiscal year 2005 PARs, reporting of 

fund stewardship at the grantee level was limited.

The CFOC and PCIE Erroneous and Improper Payments Workgroup 

created the Grants Subgroup in March 2004 to explore the feasibility of 

using various tools to measure and report improper payments, including 

evaluating currently available policies and guidance and modifying OMB 

single audit guidance to fulfill IPIA reporting requirements. Specifically, the 

Grants Subgroup’s work focused on developing cost-effective approaches 

for tracking improper payments at each stage of the payment cycle, 

including (1) evaluating existing policies and guidance that could be used 

to measure and report improper payments and (2) examining the 

possibilities of measuring improper payments using the audits conducted 

under the Single Audit Act of 1996, as amended; OMB’s Circular No. A-133 

Single Audit Compliance Supplement; and the Federal Single Audit 

Clearinghouse. 

In March 2005, the subgroup issued a report27 reflecting the results of its 

work. Specifically, the subgroup identified issues with (1) the current 

structure and design of grant programs’ distribution of funding, which 

hinders determining a national payment error rate; (2) little incentive for 

states to assist federal agencies with IPIA reporting; (3) lack of funding to 

perform IPIA compliance activities; and (4) awareness and commitment 

from all levels of management within an agency to address the causes of 

improper payments. Further, in an effort to foster working relationships 

among federal agencies and the states, OMB has begun work to clarify state 

and federal roles in estimating and reporting improper payments 

information and planning the development of state partnerships for certain 

state-administered programs.

Additionally, beginning with fiscal year 2005 PARs, OMB included three 

reporting requirements for those agencies with grant-making programs: 

(1) agency’s accomplishments in the area of funds stewardship past the 

primary recipient, (2) status of projects, and (3) results of any reviews. Our 

preliminary review of these PARs showed that in general agencies either 

did not report on their grant-making activities, did not clearly identify grant 

programs, or did not address fund stewardship beyond the primary 

27CFOC/PCIE Federal Erroneous and Improper Payments Workgroup, Grants Subgroup 

Report (Washington, D.C.: March 2005). 
Page 27 GAO-06-347 Improper Payments

recipient. However, we noted that some agencies provided partial 

information on the three reporting requirements. For example, eight 

agencies reported on the status of their projects, including one that 

discussed linking grants management and financial data to produce better 

information to ensure that projects funded by grants achieve program 

objectives and grant recipients are technically competent to carry out the 

work.

In November 2005, OMB issued draft revisions to its IPIA implementing 

guidance. This implementing guidance, together with recovery auditing 

guidance, is to be consolidated into future Parts I and II of Appendix C to 

OMB Circular No. A-123, Management’s Responsibility for Internal 

Controls (Dec. 21, 2004). Among the proposed changes, OMB provides that 

for state-administered programs, federal agencies may provide state-level 

estimates either for all states or a sample of states to generate a national 

improper payment rate for that program. Also, OMB proposes to allow 

modifications to agency-specific compliance supplements28 to enhance 

implementation of IPIA for federal grant-making agencies, such as the ones 

discussed in this report. While OMB has taken steps to begin addressing the 

complexities related to reporting improper payment information for 

federally funded, state-administered programs, additional enhancements 

could be made that address how federal agencies define state-administered 

programs and the methodology to be employed for generating a national 

estimate. Specifically, we found that the proposed changes do not clearly 

define the term state-administered programs. Without a clear definition, 

OMB is at risk of receiving inconsistent improper payment reports because 

agencies could define programs differently. In addition, we noted that the 

draft guidance did not provide basic criteria, such as the nature and extent 

of data and documentation that agencies should consider when developing 

a plan or methodology to calculate a national improper payment error rate 

for these state-administered programs. 

Conclusions Federal agencies continue to make progress toward meeting the 

requirements of IPIA, in response to the PMA and other key initiatives to 

28OMB issues a Compliance Supplement (March 2004, as revised) with Circular No. A-133, 

Single Audits of States, Local Governments, and Non-Profit Organizations, as revised

(June 27, 2003), which identifies compliance requirements that should be considered in 

state and local government single audits. Portions of the compliance supplement have 

requirements for specific programs.
Page 28 GAO-06-347 Improper Payments

eliminate improper payments. However, measuring improper payments and 

designing and implementing actions to reduce or eliminate them are not 

simple tasks, particularly for grant programs that rely on quality 

administration efforts at the state level. With budgetary pressures rising 

across the federal government, agencies are under constant and increasing 

pressure to do more with less. Preventing improper payments and 

identifying and recouping those that occur become an even higher priority 

in this environment. States have a fundamental responsibility to ensure the 

proper administration of federal awards by using sound management 

practices and maintaining internal controls to ensure distribution of federal 

funding to subrecipients or beneficiaries in accordance with federal and 

state laws and regulations. Given their involvement in determining 

eligibility and distributing benefits, states are in a position to assist federal 

agencies in reporting on IPIA requirements. In fact, the success of several 

existing programs and pilots in estimating improper payment rates 

indicates that such efforts could logically be expanded. Communication, 

coordination, and cooperation among federal agencies and the states will 

be critical factors in estimating national improper payment rates and 

meeting IPIA reporting requirements for state-administered programs. 

Recommendations for 

Executive Action

We are making four recommendations to help further the progress toward 

meeting the goals of IPIA and determining states’ role in assisting federal 

agencies to report a national improper payment estimate on federal 

programs. Specifically, we recommend that the Director, Office of 

Management and Budget,

• revise IPIA policy guidance to clearly define state-administered 

programs so that federal agencies can consistently identify all such 

programs;

• expand IPIA guidance to provide criteria that federal agencies should 

consider when developing a plan or methodology for estimating a 

national improper payment estimate for state-administered programs, 

such as criteria that address the nature and extent of data and 

documentation needed from the states to calculate a national improper 

payment estimate; 

• require federal agencies to communicate, and make available to the 

states, guidance on conducting risk assessments and estimating 

improper payments for federally funded, state-administered programs; 

and 
Page 29 GAO-06-347 Improper Payments

• share ideas, concerns, and best practices with federal agencies and 

states regarding improper payment reporting requirements for federally 

funded, state-administered programs. 

Agency Comments We received written comments on a draft of this report from OMB and 

reprinted them in appendix VII. OMB agreed with our recommendations 

and highlighted several initiatives under way to ensure that accurate 

improper payment rates can be generated without creating undue cost and 

burden on federal agencies or state partners that manage federally funded 

programs. OMB also provided technical comments that we incorporated, as 

appropriate. 

We are sending copies of this report to the Director, Office of Management 

and Budget; Secretaries of Agriculture, Health and Human Services, Labor, 

and Transportation; appropriate congressional committees; and other 

interested parties. We will also make copies available to others upon 

request. In addition, the report is available at no charge on GAO’s Web site 

at http://www.gao.gov. 

Please contact me at (202) 512-9095 or williamsm1@gao.gov if you have any 

questions about this report. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Major contributors to this report are listed in appendix VIII.

Sincerely yours,

McCoy Williams

Director, Financial Management and Assurance
Page 30 GAO-06-347 Improper Payments

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

The objectives of this report were to determine (1) what actions are being 

taken by states to assist federal agencies in estimating improper payments; 

(2) what techniques, related to detecting, preventing, or reducing improper 

payments, have states employed to ensure proper administration of federal 

awards; and (3) what assistance can be provided by the Office of 

Management and Budget (OMB) that state program administrators would 

find helpful in supporting the respective federal agencies with the 

implementation of the Improper Payments Information Act of 2002 (IPIA).

To address each of these objectives, we

• conducted a statewide survey in all 50 states and the District of 

Columbia1

 regarding actions to estimate improper payments for stateadministered federal programs for fiscal years 2003 and 2004,

• conducted a program-specific survey of the major programs in each of 

the states,

• performed site visits to selected states,

• conducted interviews with federal and state officials, and 

• reviewed federal agencies’ fiscal year 2005 performance and 

accountability reports (PAR) and prior GAO and office of inspector 

general (OIG) reports.

More detailed information on each of these aspects of our research is 

presented in the following sections. We conducted our work from April 

2005 through December 2005 in accordance with generally accepted 

government auditing standards.

Survey Development 

and Implementation

The surveys were developed based on IPIA, the National Defense 

Reauthorization Act for Fiscal Year 2002, and our executive guide on 

managing improper payments,2

 and included questions about 

1

Consistent with the report, we refer to all respondents to the survey as states.

2

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

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

Objectives, Scope, and Methodology

Page 31 GAO-06-347 Improper Payments

• state-issued policies or guidance on internal controls or on estimating 

improper payments;

• statewide risk assessments for improper payments;

• state recovery auditing efforts;

• state program efforts to prevent, detect, and reduce improper payments;

• state program participation in improper payment pilots; and

• additional assistance needed by state programs to support efforts in 

measuring and reporting improper payments.

The surveys were pretested with state officials in two states. Revisions to 

the survey were made based on comments received during the pretests.

To determine the state programs that would receive the program-specific 

survey, we designed a spreadsheet for each state containing its major 

programs, which we defined as those programs for which federal funds 

covered at least 60 percent of total state-administered expenditures. To do 

this, we used the Federal Audit Clearinghouse single audit database to 

identify a universe of federally funded, state-administered programs for 

each state. We sorted the programs from largest to smallest expenditure 

amount and identified the major programs in decreasing order until we 

obtained, in aggregate, at least 60 percent of the total federal portion of 

state-administered expenditures in each state. We provided this 

spreadsheet to states so they could confirm it with their state records. 

Table 3 lists the 25 major programs and the number of states in which each 

major program was included. The number of states identified for each 

major program ranged from 1 to 51.
Appendix I

Objectives, Scope, and Methodology

Page 32 GAO-06-347 Improper Payments

Table 3: Number of States for Which Each of the 25 Programs Was Defined as Major

Source: GAO.

As shown in table 4, the number of major programs identified for each state 

ranged from 1 to 12.

Major program name Number

1 Medicaid 51

2 Highway Planning and Construction 44

3 Food Stamp Program 36

4 Temporary Assistance for Needy Families 28

5 Unemployment Insurance 26

6 Title I Grants to Local Educational Agencies 15

7 Special Education State Grants 10

8 National School Lunch Program 5

9 Child Care and Development Block Grant 4

10 Foster Care Title IV-E 3

11 Home Investment Partnerships Program 2

12 Capitalization Grants for Clean Water State Revolving Funds 2

13 Capitalization Grants for Drinking Water State Revolving Funds 2

14 Special Supplemental Nutrition Program for Women, Infants, and 

Children

1

15 Emergency Preparedness Funding 1

16 Lower Income Housing Assistance Program Section 8 Moderate 

Rehabilitation

1

17 Abandoned Mine Land Reclamation Program 1

18 Airport Improvement Program 1

19 Federal Transit Formula Grants 1

20 Appalachian Development Highway System 1

21 Technology Transfer 1

22 Surveys, Studies, Investigations, and Special Purpose Grants 1

23 Improving Teacher Quality State Grants 1

24 Child Support Enforcement 1

25 Child Care and Development Fund 1

Total programs 240
Appendix I

Objectives, Scope, and Methodology

Page 33 GAO-06-347 Improper Payments

Table 4: Number of Major Programs in Each State

State Number of programs

1 Alabama 3

2 Alaska 8

3 Arizona 4

4 Arkansas 3

5 California 3

6 Colorado 10

7 Connecticut 3

8 Delaware 12

9 District of Columbia 4

10 Florida 4

11 Georgia 5

12 Hawaii 5

13 Idaho 3

14 Illinois 3

15 Indiana 3

16 Iowa 8

17 Kansas 7

18 Kentucky 4

19 Louisiana 3

20 Maine 3

21 Maryland 7

22 Massachusetts 7

23 Michigan 1

24 Minnesota 3

25 Mississippi 3

26 Missouri 3

27 Montana 6

28 Nebraska 3

29 Nevada 4

30 New Hampshire 5

31 New Jersey 3

32 New Mexico 5

33 New York 3

34 North Carolina 4

35 North Dakota 5
Appendix I

Objectives, Scope, and Methodology

Page 34 GAO-06-347 Improper Payments

Source: GAO.

We e-mailed the surveys in June 2005 and followed up with subsequent 

mailings and telephone communications. The collection of survey data 

ended in October 2005 with a response rate of 98 percent for the statewide 

surveys (50 of the 51 states) and a 95 percent response rate for the 

program-specific surveys (227 of the 240 programs).

We conducted follow-up phone calls to clarify responses where there 

appeared to be discrepancies; however, we did not independently verify the 

responses or information obtained through the surveys. 

Although no sampling errors were associated with our survey results, the 

practical difficulties of conducting any survey may introduce certain types 

of errors, commonly referred to as nonsampling errors. For example, 

differences in how a particular question is interpreted or differences in the 

sources of information that participants use to respond can introduce 

unwanted variability into the survey results. We included steps in both the 

data collection and data analysis stages to reduce such nonsampling errors. 

Specifically, social science survey specialists designed draft questionnaires, 

we pretested two versions of the questionnaire, and we performed reviews 

to identify inconsistencies and other indications of error prior to analysis of 

36 Ohio 6

37 Oklahoma 4

38 Oregon 4

39 Pennsylvania 3

40 Rhode Island 4

41 South Carolina 1

42 South Dakota 6

43 Tennessee 2

44 Texas 4

45 Utah 5

46 Vermont 3

47 Virginia 10

48 Washington 7

49 West Virginia 6

50 Wisconsin 7

51 Wyoming 8

Total programs 240

(Continued From Previous Page)

State Number of programs
Appendix I

Objectives, Scope, and Methodology

Page 35 GAO-06-347 Improper Payments

data. The data were keyed and verified after data entry. We conducted our 

survey work from June 2005 through December 2005.

Site Visits We visited two states and interviewed state agency officials and other 

relevant parties about initiatives in place to estimate improper payments 

for the Highway Planning and Construction, Medicaid, and Unemployment 

Insurance (UI) programs. The two states were selected based on our 

knowledge of actions under way for programs in Tennessee and Texas. We 

went to Tennessee to obtain information about the Department of 

Transportation’s (DOT) implementation of a pilot project to estimate 

improper payments related to the Highway Planning and Construction 

Program. The pilot was the first that DOT’s Federal Highway 

Administration had conducted to estimate improper payments in a state 

and covered two construction projects.

We went to Texas to obtain information about the Department of Health 

and Human Services’s (HHS) Medicaid program and the Department of 

Labor’s (Labor) UI Program. One reason for selecting Texas was that HHS’s 

Center for Medicare and Medicaid Services had identified Texas as having a 

leadership role in estimating improper payments for its Medicaid program. 

In addition, Texas was one of three states participating in a new pilot 

project organized by Labor to begin data-matching work using the National 

Directory of New Hires. More information about these states’ efforts in 

these three programs is provided in appendixes IV, V, and VI. Detailed 

information regarding the Department of Agriculture’s Food Stamp 

Program and its efforts in estimating and reporting improper payments is 

presented in appendix III. Improper payment estimates and references 

from agencies’ PARs are used for background purposes. We did not assess 

the reliability of these data.
Page 36 GAO-06-347 Improper Payments

Appendix II

States and Programs Included in Our Review ApendxiI

State Program

1 Alabama 1 Medicaid 

 2 Highway Planning and Construction 

 3 Food Stamp Program

2 Alaska 4 Medicaid 

 5 Highway Planning and Construction 

 6 Airport Improvement Program

 7 Food Stamp Program

 8 Unemployment Insurance 

 9 Temporary Assistance for Needy Families 

 10 Surveys, Studies, Investigations, and Special Purpose 

Grants

 11 Child Care and Development Block Grant 

3 Arizona 12 Medicaid

 13 Unemployment Insurance

 14 Food Stamp Program

 15 Highway Planning and Construction

4 Arkansas 16 Medicaid 

 17 Highway Planning and Construction 

 18 Food Stamp Program

5 California 19 Medicaid

 20 Unemployment Insurance

 21 Temporary Assistance for Needy Families

6 Colorado 22 Medicaid

 23 Highway Planning and Construction 

 24 Food Stamp Program

 25 Temporary Assistance for Needy Families

 26 Title I Grants to Local Educational Agencies

 27 Special Education State Grants

 28 National School Lunch Program 

 29 Foster Care Title IV-E

 30 Special Supplemental Nutrition Program for Women, 

Infants, and Children 

 31 Technology Transfer 

7 Connecticut 32 Medicaid

 33 Unemployment Insurance

 34 Highway Planning and Construction 
Appendix II

States and Programs Included in Our Review

Page 37 GAO-06-347 Improper Payments

8 Delaware 35 Medicaid

 36 Highway Planning and Construction 

 37 Food Stamp Program

 38 Temporary Assistance for Needy Families

 39 Title I Grants to Local Educational Agencies

 40 Special Education State Grants

 41 Lower Income Housing Assistance Program Section 8 

Moderate Rehabilitation

 42 Child Care and Development Fund 

 43 Improving Teacher Quality State Grants

 44 National School Lunch Program

 45 Child Support Enforcement

 46 Federal Transit Formula Grants

9 District of 

Columbia

47 Medicaid

 48 Highway Planning and Construction 

 49 Emergency Preparedness Funding

 50 Temporary Assistance for Needy Families

10 Florida 51 Medicaid

 52 Highway Planning and Construction 

 53 Food Stamp Program

 54 Temporary Assistance for Needy Families

11 Georgia 55 Medicaid

 56 Highway Planning and Construction

 57 Food Stamp Program

 58 Temporary Assistance for Needy Families

 59 National School Lunch Program 

12 Hawaii 60 Medicaid

 61 Food Stamp Program

 62 Highway Planning and Construction

 63 Temporary Assistance for Needy Families

 64 Capitalization Grants for Clean Water State Revolving 

Funds

13 Idaho 65 Medicaid

 66 Unemployment Insurance

 67 Highway Planning and Construction

14 Illinois 68 Medicaid

 69 Unemployment Insurance

(Continued From Previous Page)

State Program
Appendix II

States and Programs Included in Our Review

Page 38 GAO-06-347 Improper Payments

 70 Food Stamp Program

15 Indiana 71 Medicaid

 72 Unemployment Insurance

 73 Highway Planning and Construction

16 Iowa 74 Medicaid

 75 Highway Planning and Construction

 76 Food Stamp Program

 77 Temporary Assistance for Needy Families

 78 Special Education State Grants

 79 Home Investment Partnerships Program

 80 Title I Grants to Local Educational Agencies

 81 National School Lunch Program

17 Kansas 82 Medicaid

 83 Highway Planning and Construction

 84 Food Stamp Program

 85 Unemployment Insurance

 86 Temporary Assistance for Needy Families

 87 Title I Grants to Local Educational Agencies

 88 Special Education State Grants

18 Kentucky 89 Medicaida

 90 Unemployment Insurance

 91 Highway Planning and Construction

 92 Food Stamp Program

19 Louisiana 93 Medicaid

 94 Food Stamp Program

 95 Highway Planning and Construction

20 Maine 96 Medicaid

 97 Highway Planning and Construction

 98 Food Stamp Program

21 Maryland 99 Medicaid

 100 Highway Planning and Construction

 101 Food Stamp Program

 102 Temporary Assistance for Needy Families

 103 Unemployment Insurance

 104 Title I Grants to Local Educational Agencies

 105 Foster Care Title IV-E

22 Massachusetts 106 Medicaid

(Continued From Previous Page)

State Program
Appendix II

States and Programs Included in Our Review

Page 39 GAO-06-347 Improper Payments

 107 Unemployment Insurance

 108 Highway Planning and Construction

 109 Temporary Assistance for Needy Families

 110 Food Stamp Program

 111 Title I Grants to Local Educational Agencies

 112 Special Education State Grants

23 Michigan 113 Medicaid

24 Minnesota 114 Medicaid

 115 Unemployment Insurance

 116 Highway Planning and Construction

25 Mississippi 117 Medicaid

 118 Highway Planning and Construction

 119 Food Stamp Program

26 Missouri 120 Medicaida

 121 Unemployment Insurancea

 122 Highway Planning and Constructiona

27 Montana 123 Medicaid

 124 Highway Planning and Construction

 125 Food Stamp Program

 126 Temporary Assistance for Needy Families

 127 Title I Grants to Local Educational Agencies

 128 Special Education State Grants

28 Nebraska 129 Medicaid

 130 Highway Planning and Construction

 131 Unemployment Insurance

29 Nevada 132 Medicaid

 133 Highway Planning and Construction

 134 Food Stamp Program

 135 Temporary Assistance for Needy Families

30 New Hampshire 136 Medicaid

 137 Highway Planning and Constructiona

 138 Temporary Assistance for Needy Families

 139 Food Stamp Program

 140 Unemployment Insurance

31 New Jersey 141 Medicaid

 142 Highway Planning and Construction

 143 Temporary Assistance for Needy Families

(Continued From Previous Page)

State Program
Appendix II

States and Programs Included in Our Review

Page 40 GAO-06-347 Improper Payments

32 New Mexicoa 144 Medicaida

 145 Highway Planning and Construction

 146 Food Stamp Programa

 147 Temporary Assistance for Needy Familiesa

 148 Title I Grants to Local Educational Agenciesa

33 New York 149 Medicaid

 150 Temporary Assistance for Needy Families

 151 Unemployment Insurance

34 North Carolina 152 Medicaid

 153 Unemployment Insurance

 154 Highway Planning and Construction

 155 Food Stamp Program

35 North Dakota 156 Medicaid

 157 Highway Planning and Construction

 158 Food Stamp Program

 159 Temporary Assistance for Needy Families

 160 Title I Grants to Local Educational Agencies

36 Ohio 161 Medicaid

 162 Highway Planning and Construction

 163 Food Stamp Program

 164 Temporary Assistance for Needy Families

 165 Title I Grants to Local Educational Agencies

 166 Child Care and Development Block Grant 

37 Oklahoma 167 Medicaid

 168 Highway Planning and Construction

 169 Food Stamp Program

 170 Temporary Assistance for Needy Families

38 Oregon 171 Medicaid

 172 Unemployment Insurance

 173 Food Stamp Program

 174 Highway Planning and Construction

39 Pennsylvania 175 Medicaid

 176 Highway Planning and Construction

 177 Unemployment Insurance

40 Rhode Island 178 Medicaid

 179 Unemployment Insurance

 180 Highway Planning and Construction

(Continued From Previous Page)

State Program
Appendix II

States and Programs Included in Our Review

Page 41 GAO-06-347 Improper Payments

 181 Temporary Assistance for Needy Families

41 South Carolina 182 Medicaid

42 South Dakota 183 Medicaid

 184 Highway Planning and Construction

 185 Capitalization Grants for Clean Water State Revolving 

Funds 

 186 Food Stamp Program

 187 Home Investment Partnerships Program

 188 Capitalization Grants for Drinking Water State Revolving 

Funds

43 Tennessee 189 Medicaid

 190 Food Stamp Program

44 Texas 191 Medicaid

 192 Highway Planning and Construction

 193 Food Stamp Program

 194 Title I Grants to Local Educational Agencies

45 Utah 195 Medicaid

 196 Highway Planning and Construction

 197 Temporary Assistance for Needy Families

 198 Unemployment Insurance

 199 Food Stamp Program

46 Vermont 200 Medicaid

 201 Highway Planning and Construction

 202 Unemployment Insurance

47 Virginia 203 Medicaid

 204 Highway Planning and Construction

 205 Food Stamp Program

 206 Unemployment Insurance

 207 Special Education State Grants

 208 National School Lunch Program

 209 Title I Grants to Local Educational Agencies

 210 Temporary Assistance for Needy Families

 211 Foster Care Title IV-E

 212 Child Care and Development Block Grant 

48 Washington 213 Medicaid

 214 Unemployment Insurance

 215 Highway Planning and Construction

 216 Food Stamp Program

(Continued From Previous Page)

State Program
Appendix II

States and Programs Included in Our Review

Page 42 GAO-06-347 Improper Payments

Source: GAO.

a

No survey received.

 217 Temporary Assistance for Needy Familiesa

 218 Child Care and Development Block Granta

 219 Special Education State Grants

49 West Virginia 220 Medicaid

 221 Highway Planning and Construction

 222 Food Stamp Program

 223 Appalachian Development Highway System

 224 Temporary Assistance for Needy Families

 225 Title I Grants to Local Educational Agencies

50 Wisconsin 226 Medicaid

 227 Highway Planning and Construction

 228 Temporary Assistance for Needy Families

 229 Unemployment Insurance

 230 Food Stamp Program

 231 Title I Grants to Local Educational Agencies

 232 Special Education State Grants

51 Wyoming 233 Medicaid

 234 Food Stamp Programa

 235 Title I Grants to Local Educational Agencies

 236 Abandoned Mine Land Reclamation Program

 237 Temporary Assistance for Needy Familiesa

 238 Unemployment Insurance

 239 Capitalization Grants for Drinking Water State Revolving 

Funds

 240 Special Education State Grants

(Continued From Previous Page)

State Program
Page 43 GAO-06-347 Improper Payments

Appendix III

Food Stamp Quality Control System ApendxiI

Overview of Program The Food Stamp Program is intended to help low-income individuals and 

families obtain a more nutritious diet by supplementing their incomes with 

benefits to purchase food. The Department of Agriculture’s (USDA) Food 

and Nutrition Service (FNS) administers the program in partnership with 

the states. FNS pays the full cost of Food Stamp benefits and shares the 

states’ administrative costs and is responsible for promulgating program 

regulations and ensuring that state officials administer the program in 

compliance with program rules. States handle day-to-day operation and 

management, including certifying eligibility of participants, delivering the 

benefits, and monitoring recipients’ compliance. The states usually 

administer the program out of local assistance offices that determine 

whether households meet the program’s eligibility requirements, calculate 

monthly benefits for qualified households, and issue benefits to 

participants. The local assistance offices often administer other benefit 

programs as well, including Temporary Assistance for Needy Families 

(TANF), Medicaid, and child care assistance. 

To measure the accuracy of Food Stamp payments, FNS and the states have 

an extensive quality control (QC) system from which the Food Stamp 

Program payment error rate is developed. The QC system, established in 

1970, reviews and measures the accuracy of household certifications using 

a statistically valid methodology to calculate improper payment estimates 

for the Food Stamp Program for all 50 states, Guam, the Virgin Islands, and 

the District of Columbia. The system is mandated by the Food Stamp Act, 

as amended, and further defined in program regulations and agency 

guidance.1

The QC process uses a systematic random sampling of Food Stamp 

Program participants. State agencies select cases monthly that are 

reviewed to determine the accuracy of the eligibility and benefit-level 

determination. The review includes a client interview, verification of all 

elements of eligibility, and the basis of issuance of food stamp benefits. The 

states report the findings of all QC reviews to FNS. FNS reviewers validate 

a sample of the states’ reviews by conducting a second review. The results 

of the federal validation and state findings are used to calculate a final error 

rate for each state agency. 

1

7 U.S.C. § 2025(c); 7 C.F.R. §§ 275.10-14; and FNS Handbook 310. 
Appendix III

Food Stamp Quality Control System

Page 44 GAO-06-347 Improper Payments

As reported in USDA’s fiscal year 2005 PAR, the causes of improper 

payments in the Food Stamp Program include client errors, such as 

incomplete or inaccurate reporting of income, assets, or both by 

participants at the time of certification or by not reporting subsequent 

changes. Causes can also be provider based, such as errors in determining 

eligibility or benefits by caseworkers or eligibility worker delays in action 

or inaction on client-reported changes. In its fiscal year 2005 PAR, USDA 

reported a national error rate of 5.88 percent, or $1.4 billion, for the Food 

Stamp Program. The estimate is based on fiscal year 2004 data, the most 

current data available for this measure. 

Statistically valid state error rates are weighted annually to determine a 

national average error rate for the Food Stamp Program. Once the error 

rates are finalized, FNS compares each state’s performance with the 

national error rate and imposes penalties or provides incentives according 

to specifications in the law. 

Improper Payment 

Estimates

OMB’s implementing guidance requires that agencies report overpayments 

and underpayments in their programs if the figures are available. USDA 

reports these amounts in its PAR for the Food Stamp Program. Table 5 

provides the overpayment and underpayment amount for each state. In 

fiscal year 2003, overpayments ranged from $454,636 to $103,236,074 while 

underpayments ranged from $126,288 to $40,679,714. In fiscal year 2004, 

overpayments ranged from $756,935 to $94,118,074 and underpayments 

ranged from $151,016 to $46,714,340.
Appendix III

Food Stamp Quality Control System

Page 45 GAO-06-347 Improper Payments

Table 5: Food Stamp Improper Payment Amounts by State for Fiscal Years 2003 and 2004

State

FY 2003 overpayment 

amount

FY 2003 underpayment 

amount

FY 2004 overpayment 

amount

FY 2004 underpayment 

amount

Alabama $32,022,705 $5,313,811 $36,036,075 $5,023,521 

Alaska 7,124,955 1,998,142 3,207,363 1,275,217 

Arizona 23,438,760 5,623,312 29,586,835 8,205,724 

Arkansas 10,712,762 1,521,699 14,118,057 4,370,701 

California 103,236,074 40,679,714 94,118,074 31,836,981 

Colorado 12,361,379 2,683,720 5,893,540 1,517,650 

Connecticut 11,572,762 2,884,948 7,150,599 2,607,401 

Delaware 1,945,107 626,066 2,425,654 1,102,570 

District of Columbia 6,380,065 1,703,153 4,631,618 877,570 

Florida 54,335,945 24,006,609 66,471,972 11,670,652 

Georgia 31,296,436 9,075,967 48,592,664 8,776,242 

Hawaii 5,388,605 2,077,346 5,237,425 1,366,285 

Idaho 6,049,789 2,611,365 5,576,573 2,656,377 

Illinois 43,162,302 8,106,091 56,449,466 11,507,938 

Indiana 38,405,811 9,964,228 23,903,276 8,132,609 

Iowa 6,163,775 1,641,683 8,781,450 2,116,012 

Kansas 11,287,114 3,383,327 6,573,509 1,501,162 

Kentucky 24,797,796 5,932,022 25,346,127 5,210,339 

Louisiana 30,220,286 9,456,688 27,819,108 8,519,131 

Maine 12,605,513 3,883,391 12,467,964 2,848,225 

Maryland 13,154,521 5,421,102 12,614,597 4,099,744 

Massachusetts 9,059,608 3,603,542 9,071,744 5,418,693 

Michigan 64,603,806 22,317,679 43,193,936 21,238,512 

Minnesota 13,604,820 4,497,086 12,399,691 4,880,200 

Mississippi 10,286,766 3,350,738 15,557,052 5,703,049 

Missouri 30,479,379 7,832,690 42,591,976 6,634,264 

Montana 3,392,350 592,972 2,843,188 799,894 

Nebraska 5,063,401 1,402,035 4,608,506 1,478,200 

Nevada 7,278,706 2,016,855 7,362,460 1,625,478 

New Hampshire 2,500,909 498,586 2,517,133 574,847 

New Jersey 6,200,425 2,032,926 7,663,778 3,737,507 

New Mexico 8,918,362 2,385,570 9,479,693 2,674,317 

New York 61,527,878 37,050,848 60,972,532 46,714,340 

North Carolina 25,429,487 6,454,185 16,269,128 7,607,324 
Appendix III

Food Stamp Quality Control System

Page 46 GAO-06-347 Improper Payments

Source: USDA FNS.

State and Federal 

Improper Payment 

Initiatives Under Way

Since fiscal year 1999, the combined Food Stamp error rate has continued 

to decline. Figure 2 displays the error rates for the 6-year period from fiscal 

years 1999 to 2004.

North Dakota 1,394,697 381,706 1,079,676 588,182 

Ohio 44,728,801 13,357,127 70,446,518 14,735,232 

Oklahoma 28,380,204 4,168,229 19,769,506 3,699,324 

Oregon 40,765,571 8,762,693 25,082,127 7,599,386 

Pennsylvania 49,012,613 15,473,533 26,691,625 10,639,319 

Rhode Island 4,843,564 1,307,212 7,686,034 2,096,191 

South Carolina 18,709,605 3,147,825 27,716,610 3,658,793 

South Dakota 454,636 126,288 911,490 151,016 

Tennessee 44,246,038 7,723,207 40,427,562 13,881,753 

Texas 41,942,991 19,937,027 65,743,403 29,296,183 

Utah 3,474,989 1,635,289 3,361,379 1,268,213 

Vermont 2,630,295 575,730 1,631,109 424,810 

Virginia 15,124,786 4,870,694 24,760,618 6,618,704 

Washington 19,798,026 4,969,226 26,770,075 7,921,757 

West Virginia 10,371,097 3,068,116 12,721,487 2,548,932 

Wisconsin 15,828,776 5,929,954 13,040,841 4,876,844 

Wyoming 728,845 288,651 756,935 414,691 

Total $1,076,443,893 $338,352,603 $1,100,129,758 $344,728,006

(Continued From Previous Page)

State

FY 2003 overpayment 

amount

FY 2003 underpayment 

amount

FY 2004 overpayment 

amount

FY 2004 underpayment 

amount
Appendix III

Food Stamp Quality Control System

Page 47 GAO-06-347 Improper Payments

Figure 2: Food Stamp National Payment Error Rate, Fiscal Years 1999-2004

Actions taken by both the states and FNS contributed to the declining error 

rates. For example, the state of Arizona has completed a statewide 

implementation of a fingerprint imaging system. The state is using the 

system as a means of positive identification of welfare applicants and 

clients to ensure that participants do not use false identities to receive 

benefits to which they are not entitled; the system is also used in the 

eligibility determination process. The state reported that cost avoidance 

savings resulted from welfare fraud reduction achieved through the 

identification and prevention of duplicate enrollments in the Food Stamp 

and TANF programs. 

Recent initiatives reported in USDA’s fiscal year 2005 PAR include FNS’s 

nationwide implementation of an electronic benefit transfer (EBT) system 

for the delivery of food stamp benefits. EBT recipients use a plastic card, 

much like debit cards, to pay for their food at authorized retail stores. 

Funds are transferred from a Food Stamp benefits account to a retailer’s 

account. With EBT cards, food stamp customers pay for groceries without 

any paper coupons changing hands. By eliminating paper coupons, EBT 

creates an electronic record for each transaction that precludes certain 

0

1

2

3

4

5

6

7

8

9

10

1999 2000 2001 2002 2003 2004

Error rate

Source: USDA FNS.

Fiscal year

9.86

8.91 8.66

8.26

6.63

5.88
Appendix III

Food Stamp Quality Control System

Page 48 GAO-06-347 Improper Payments

types of fraudulent claims and makes other attempted frauds easier to 

detect. 

Other FNS efforts include Partner Web, a Web-based system to facilitate 

communication and information exchange between USDA and its nutrition 

assistance program partners. Another initiative, the National Payment 

Accuracy Workgroup, consists of representatives from USDA headquarters 

and regional offices who meet to discuss best practice methods and 

strategies. The practices the states are promoting include

• preparing reports detailing causes and sources of errors for the local 

offices and publishing and distributing monthly error rates for all local 

offices;

• transmitting the results of statewide error review panels on the source 

and causes of errors to local offices, along with suggested corrective 

actions;

• sponsoring statewide QC meetings and state best practices conferences 

for local offices to discuss error rate actions taken and common 

problems; and

• sponsoring local office participation in FNS regional conferences.

Table 6 summarizes these and other factors contributing to the declining 

error rate.
Appendix III

Food Stamp Quality Control System

Page 49 GAO-06-347 Improper Payments

Table 6: Summary of Factors Contributing to Declining Food Stamp Improper 

Payment Error Rates and Amounts

Factor Description

USDA FNS – general actions

FNS monitors and 

validates states’ 

QC reviews

FNS approves sampling plans and state samples to determine 

improper payment rates and amounts.

FNS is responsible 

for determining 

efficiency and 

effectiveness of 

state agency

FNS establishes an opinion on efficiency and effectiveness of the 

state based on

(1) reports submitted to FNS by the state; 

(2) FNS reviews of state agency operations;

(3) state performance reporting systems and corrective action 

efforts; and

(4) other available information, such as federal audits and 

investigations, civil rights reviews, administrative cost data, 

complaints, and pending litigation.

FNS imposes 

penalties and 

incentives on state 

Food Stamp 

programs

FNS compares state error rates to the national error rate to 

determine incentives and penalties for state Food Stamp programs.

FNS promotes 

knowledge sharing 

of good practices

FNS provides funding to state and local food stamp officials to 

promote knowledge sharing. States are using information from the 

QC system to track the results of their policy and program changes 

over time and communicate timely operational information to local 

offices.

USDA FNS – specific actions

USDA Partner Web FNS has established an intranet Web site for state Food Stamp 

agencies.

National Payment 

Accuracy 

Workgroup

The workgroup is an information-sharing tool across regions and 

states that consists of representatives from USDA headquarters and 

regional offices.

Payment Accuracy 

Branch

This national level group works with the FNS regions to suggest 

policy and program changes and to monitor state performance.

USDA Early 

Detection System

This system targets states that may be experiencing a higher 

incidence of errors based on preliminary QC data.

Technological

EBT EBT electronically transfers funds from a food stamp benefits 

account to a retailer's account. 

GovBenefits GovBenefits is a citizen-centered guide to government assistance 

and benefits, including food stamps; school lunch and breakfast; 

Women, Infants, and Children; and nutrition assistance. It includes a 

new prescreening tool that enables anyone with access to the 

Internet to determine his or her eligibility for food stamps.
Appendix III

Food Stamp Quality Control System

Page 50 GAO-06-347 Improper Payments

Source: GAO.

Data matches Income Eligibility and Verification System. This is a tool for state 

agencies to use in comparing income reported by program 

applicants and recipients with income reported on six databases 

containing information on earnings reported to the state by in-state 

employers; earned and unearned income reported to the Internal 

Revenue Service; and the receipt of Social Security, unemployment 

insurance, and supplementary security income benefits.

Systematic Alien Verification Eligibility system matches. This 

program enables federal, state, and local government agencies to 

obtain immigration status information for determining 

applicant’s/recipient’s eligibility for public benefits. 

Fingerprint imaging 

system

This is an automated fingerprint imaging system used by certain 

states as a means of positive identification of welfare applicants and 

clients.

Legislation and oversight

Farm Security and 

Rural Investment 

Act of 2002

The act has allowed states to adopt simplified reporting 

requirements, which require food stamp households to report 

interim changes in their income only when they rise to a level that 

would make them ineligible for benefits. 

Congress Congress passed IPIA and has held congressional hearings.

OMB OMB issued guidance to federal agencies for IPIA reporting.

External auditors GAO and USDA OIG audited and reviewed the Food Stamp 

Program. 

GAO has issued reports on governmentwide improper payment 

reporting.

(Continued From Previous Page)

Factor Description
Page 51 GAO-06-347 Improper Payments

Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database ApendxiIV

Overview of Program The UI Program was established by Title III of the Social Security Act in 

1935 and is a key component in ensuring the financial security of America’s 

workforce. The program, which is administered by the states with 

oversight from Labor’s Employment and Training Administration, provides 

temporary cash benefits to workers who lose their jobs through no fault of 

their own. Although Labor provides oversight and guidance to ensure that 

each state operates its program consistent with federal guidelines, the 

federal-state structure of UI places primary responsibility for administering 

the program on the states. The states can administer their UI programs in 

ways that best suit their needs within the guidelines established by federal 

law. Eligibility for UI, benefit amounts, and the length of time benefits are 

available are determined by the state law under which UI claims are 

established. In the majority of states, benefit funding is based solely on a 

tax imposed on employers. 

Labor has two initiatives in place to identify, estimate, and prevent 

improper payments—the Benefit Accuracy Measurement (BAM) program 

and the National Directory of New Hires (NDNH). Labor’s BAM program is 

designed to determine the accuracy of paid and denied claims in the UI 

Program. It does this by reconstructing the UI claims process from samples 

of weekly payments and denied claims using data verified by trained 

investigators. For claims that were overpaid, underpaid, or improperly 

denied, the BAM program determines the cause of and the party 

responsible for the error, the point in the UI claims process at which the 

error was detected, and actions taken by the agency and employers prior to 

the error. For erroneously paid claims, the BAM program determines the 

amount of benefits the claimants should have received, which becomes the 

basis for subsequent recovery efforts. 

The NDNH is a database, maintained by HHS’s Office of Child Support 

Enforcement (OCSE), that contains information on all newly hired 

employees, quarterly wage reports for all employees, and UI claims 

nationwide. The NDNH enhances states’ ability to detect unreported work 

violations by UI claimants working in other states or for certain employers 

that operate in multiple states.1

 In addition, the NDNH can help improve 

the accuracy of Labor’s error estimates. Output files from the NDNH crossmatch can be easily integrated into Labor’s BAM program by cross1

Under current statute, employers need only be registered in one state’s new hire database, 

despite having work locations or employees in other states.
Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database

Page 52 GAO-06-347 Improper Payments

matching the Social Security numbers of the claimants against the NDNH 

results.

Improper Payment 

Estimates

Since 1988, Labor has reported a national improper payment estimate for 

its UI Program. As part of the BAM program’s quality control, each state is 

responsible for selecting representative samples and investigating the 

accuracy of the benefit determinations, benefit payments, and recoveries. 

The results of these reviews are integrated with the BAM system to identify 

erroneously paid claims. 

UI overpayments at a national level have fluctuated over the past 16 years. 

The lowest reported national error rate occurred in 1991 at 7.5 percent 

while the highest national error rate occurred in 1988 with 10.1 percent, as 

shown in figure 3. 

Figure 3: UI Overpayment National Error Rates, Calendar Years 1988-2004

We also noted that since 2001, UI’s national error rate has steadily 

increased. Labor attributes the rise in error rates to an increase in 

payments to claimants who improperly continue to claim benefits despite 

having returned to work. Although when combined, the dollar amounts of 

0

2

4

6

8

10

12

Error Rate

Source: Labor.

Year

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

10.1

8.8

8.0

7.5

8.0

8.8 8.6

8.0 8.0

8.7 8.5

9.2

8.6

8.2

9.1 9.3

9.9
Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database

Page 53 GAO-06-347 Improper Payments

overpayments and underpayments decreased between calendar years 2003 

and 2004, the national error rate increased from 9.9 percent in calendar 

year 2003 to 10.6 percent in calendar year 2004. 

At the state level, the improper payment overpayments in calendar year 

2003 ranged from $2,829,017 to $450,073,624, while underpayments ranged 

from $100,263 to $37,825,338. In calendar year 2004, overpayments ranged 

from $2,250,919 to $317,991,985 and underpayments ranged from $20,184 to 

$40,330,046. Table 7 lists the UI improper payment overpayments and 

underpayments by state.

Table 7: UI Overpayments and Underpayments by State for Calendar Years 2003 and 

2004

State

CY 2003

overpayment 

amount

CY 2003

underpayment 

amount

CY 2004 

overpayment 

amount

CY 2004 

underpayment 

amount

Alabama $35,105,972 $584,587 $32,171,531 $554,682 

Alaska 11,162,449 1,596,636 17,821,095 946,371 

Arizona 72,804,546 431,189 86,486,204 395,947 

Arkansas 29,215,897 949,596 36,479,866 1,261,552 

California 414,858,548 37,825,338 317,991,985 16,002,843 

Colorado 41,184,047 2,164,869 39,215,471 2,695,087 

Connecticut 30,687,056 2,247,107 27,402,585 6,134,051 

Delaware 15,302,193 1,561,448 14,709,043 1,312,533 

District of 

Columbia

 11,165,946 910,817 8,798,087 731,650 

Florida 57,582,448 4,465,578 39,949,285 3,886,117 

Georgia 39,528,066 3,311,252 25,628,425 4,440,834 

Hawaii 7,389,037 484,995 4,588,132 377,273 

Idaho 32,543,779 1,635,577 26,574,852 854,074 

Illinois 198,225,860 21,203,264 258,873,508 7,863,974 

Indiana 81,364,624 3,517,644 72,745,986 1,504,146 

Iowa 49,946,856 4,540,623 35,151,973 4,695,390 

Kansas 105,514,650 453,015 95,028,141 115,817 

Kentucky 12,066,382 2,912,575 19,653,481 2,591,230 

Louisiana 43,613,878 3,371,922 53,374,181 2,799,155 

Maine 10,618,736 489,105 8,639,827 197,681 

Maryland 69,819,363 1,637,991 40,050,308 418,379 
Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database

Page 54 GAO-06-347 Improper Payments

Source: Labor. 

Massachusetts 59,951,206 22,975,313 81,028,654 25,012,542 

Michigan 171,063,097 11,938,973 169,804,248 13,363,398 

Minnesota 74,342,318 5,950,738 61,201,839 6,762,257 

Mississippi 14,667,566 737,159 11,691,476 777,317 

Missouri 37,829,265 455,774 42,021,818 1,322,721 

Montana 19,084,853 357,651 10,666,139 554,886 

Nebraska 28,983,959 442,606 16,286,657 559,465 

Nevada 27,517,223 647,102 24,515,908 596,053 

New Hampshire 8,914,628 723,087 5,895,778 595,850 

New Jersey 237,090,931 27,525,068 222,110,349 40,330,046 

New Mexico 3,734,779 100,263 15,847,493 956,518 

New York 234,778,623 18,566,677 228,731,314 10,745,766 

North Carolina 120,614,563 2,535,441 61,128,148 3,182,783 

North Dakota 3,787,405 120,433 2,830,433 84,326 

Ohio 155,256,162 17,731,594 251,668,448 22,282,432 

Oklahoma 5,296,937 1,000,533 6,485,106 495,540 

Oregon 76,283,709 2,087,765 71,048,437 3,265,205 

Pennsylvania 211,443,998 24,573,951 177,952,460 12,198,354 

Rhode Island 11,154,488 870,796 13,413,248 1,161,938 

South Carolina 34,591,337 910,298 35,610,338 803,766 

South Dakota 2,963,279 147,069 2,413,427 20,184 

Tennessee 46,661,937 1,903,459 20,595,851 1,455,381 

Texas 450,073,624 3,038,105 271,753,213 9,491,381 

Utah 18,988,138 1,804,303 11,817,023 1,366,489 

Vermont 2,829,017 887,148 2,250,919 388,363 

Virginia 127,967,956 2,610,323 107,088,844 2,392,156 

Washington 167,103,334 3,326,944 118,052,534 2,052,148 

West Virginia 3,630,150 1,264,231 6,652,142 1,222,713 

Wisconsin 64,602,987 2,345,646 86,624,141 3,788,730 

Wyoming 5,360,715 151,887 5,662,231 360,752 

Total $3,796,268,517 $254,025,465 $3,404,182,582 $227,368,246 

(Continued From Previous Page)

State

CY 2003

overpayment 

amount

CY 2003

underpayment 

amount

CY 2004 

overpayment 

amount

CY 2004 

underpayment 

amount
Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database

Page 55 GAO-06-347 Improper Payments

State and Federal 

Improper Payment 

Initiatives Under Way

In addition to its leadership role in producing improper payment estimates 

on a national level, Labor has initiated the NDNH pilot for the UI Program 

to further assist in identifying, detecting, and preventing improper 

payments. In fiscal year 2005, three states (Texas, Utah, and Virginia) 

participated in the pilot. Labor initiated the NDNH pilot to determine how a 

cross-match between NDNH and state UI claimant data would help identify 

and reduce improper payments. For further review of Labor’s pilot project, 

we visited the state of Texas. 

Texas’s participation in the NDNH pilot was through its Texas Workforce 

Commission (TWC). During this pilot, TWC conducted three matches of the 

state UI claimant data against the NDNH’s new hire data, UI claimant data, 

and quarterly wage data to identify potential overpayments. Generally, to 

perform these matches, TWC electronically transmitted state UI claimant 

data to HHS’s OCSE. OCSE then compared the state UI claimant data to 

data in the NDNH. Potential matches of claimants who may have 

improperly received unemployment benefits were then transmitted to 

TWC. TWC investigated all matches to determine the validity and amount 

of overpayment. According to TWC, using the national cross-match along 

with the statewide cross-match helped detect 50 percent more cases of 

potential fraud in one quarter than it would have detected otherwise. 

Besides the NDNH pilot, Texas also communicated to us that it had several 

other actions in place to manage UI improper payments. In July 2004, the 

Texas governor issued an executive order2

 for each state agency to report 

on efforts to assess risk in the agency; identify best practices for 

eliminating fraud in contracting, contract management, and procurement; 

and describe common components for fraud prevention and elimination 

programs. Each agency was also to develop a fraud prevention program. 

Additionally, the executive order required TWC to prioritize prevention, 

detection, and elimination of fraud and abuse in the UI Program by

• identifying any state policies, weaknesses in computer cross-matching 

systems, and other appropriate factors that are ineffective in preventing 

fraud and abuse;

2

Executive Order RP36, Relating to Preventing, Detecting, and Eliminating Fraud, Waste and 

Abuse, Governor of the State of Texas (July 12, 2004).
Appendix IV

UI Benefit Accuracy Measurement and 

National Directory of New Hires Database

Page 56 GAO-06-347 Improper Payments

• developing strategies to address benefit fraud and claims overpayments; 

and

• identifying and implementing national best practices for detecting and 

prosecuting fraudulent schemes, identifying cost-effective strategies 

designed to eliminate fraud, and increasing recovery of overpayments.

Further, TWC has been educating employers on their responsibilities to 

provide TWC with information to make benefit determinations. For 

example, TWC sent letters to those employers that have a history of not 

providing complete or timely information during the initial claims 

investigation. These letters reiterated employers’ responsibilities and 

TWC’s expectations for receiving timely information during an 

investigation.

Based on its NDNH pilot results, Labor reported in its fiscal year 2005 PAR 

that a substantial amount of additional overpayments could be detected 

using the database. In addition, Labor reported that it is already moving 

ahead with full implementation of the NDNH cross-match with 5 states 

(Connecticut, Texas, Utah, Virginia, and Washington). Labor expects 29 

states to use NDNH by the end of fiscal year 2006. 

In addition to funding initiatives related to the new hire cross-matches, 

Labor has announced that states will be given an additional incentive to 

prevent and detect overpayments by implementing core measures in states’ 

performance budget plans based on the level of overpayments the states 

have detected. Labor’s fiscal year 2006 budget request contained a 

legislative proposal that is designed to give states the means to obtain 

funding for integrity activities, including additional staff, to enhance 

recovery and prevent overpayments. Also, to reduce overpayments and 

facilitate reemployment, Labor awarded Reemployment and Eligibility 

Assessments grants to 21 states during fiscal year 2005. The grants have 

been used to conduct in-person claimant interviews to assess UI 

beneficiaries’ need for reemployment services and their continued 

eligibility for benefits and to ensure that beneficiaries understand that they 

must stop claiming benefits upon their return to work. Further, Labor 

continues to promote data sharing with other agencies, such as the Social 

Security Administration, to identify, detect, and prevent improper 

payments.
Page 57 GAO-06-347 Improper Payments

Appendix V

Highway Planning and Construction Pilot to 

Estimate Improper Payments ApendxiV

Overview of Program The objective of the Highway Planning and Construction Program is to 

assist state transportation agencies in the planning and development of an 

integrated, interconnected transportation system. The program is also 

called the Federal-Aid Highway Program since federal funding for 

highways is provided to the states mostly through a series of formula grant 

programs collectively known by that name. The Federal Highway 

Administration under DOT administers the Highway Planning and 

Construction Program and distributes most highway funds, which can be 

used for a variety of projects, such as capital improvement and 

development of transportation management systems. Most projects are 

administered by or through state transportation departments, and the 

states have considerable discretion in selecting specific highway projects 

and in determining how to allocate available federal funds among the 

various projects they have selected. 

In fiscal year 2004, DOT conducted a review of its programs and activities, 

as required by IPIA. As a result of this review, DOT found that data did not 

exist at the department level to adequately estimate the amount of 

improper payments for its grant programs. To address this issue, DOT 

contracted with an outside firm and initiated a research and development 

project to develop a methodology to estimate improper payments in its 

grant programs. The Highway Planning and Construction Program was 

selected as the test pilot program. The pilot project had two objectives: 

(1) develop a testing methodology for grantees and (2) test the developed 

methodology. 

The pilot was conducted on two construction projects in Tennessee. 

Samples were selected from payment transaction files using statistical 

sampling. For items selected, documentation that supported payment was 

requested and reviewed. The contractor developed a comprehensive 

document that described the planning and construction phases of projects 

and a methodology to determine whether the goods and services received 

were in accordance with contractual terms and conditions. Figure 4 is an 

example of the testing procedures for asphalt, one component of the 

construction project. 
Appendix V

Highway Planning and Construction Pilot to 

Estimate Improper Payments

Page 58 GAO-06-347 Improper Payments

Figure 4: Example of Test Procedures for Asphalt

Improper Payment 

Estimates

In its fiscal years 2004 and 2005 PARs, DOT reported a zero-dollar amount 

for its improper payment estimate for the Highway Planning and 

Construction Program. To enhance its reporting of improper payments, 

Source: DOT.

Test Procedures

1. Are prices billed for asphalt in accordance with allowable 

tables of asphalt process for the area and period?

2. Are asphalt deliveries supported by delivery tickets?

3. Based on inspection reports, is asphalt quality in accordance with contract provisions or is the price adjusted 

based on quality and/or pavement smoothness?

4. Based on inspection reports is asphalt depth in accordance 

with contract provisions?

5. Improper payment calculation

A. Calculate price differences.

B. Calculate volume differences.

C. Compute the monetary effect of price differences by 

multiplying the difference by billed volume.

D. Compute the monetary effect of volume differences by 

multiplying the volume difference by the billed price for 

billed volume.

E. The amount of improper payment is the sum of the monetary 

effect of price differences and volume differences.
Appendix V

Highway Planning and Construction Pilot to 

Estimate Improper Payments

Page 59 GAO-06-347 Improper Payments

DOT conducted a pilot in the state of Tennessee. DOT completed this 

project in the summer of 2005. Testing disclosed three underpayments, one 

of which was determined by DOT to be statistically insignificant. An 

extrapolation of the other two errors to the population of payments for that 

construction project resulted in an improper payment estimate of $111,671. 

The sample was not designed to produce an estimate for the Tennessee 

statewide Highway Planning and Construction Program.

State and Federal 

Improper Payment 

Initiatives Under Way

DOT noted in its fiscal year 2005 PAR that the Tennessee pilot resulted in a 

methodology and testing procedures that will be used nationwide, but that 

the testing procedures may need to be modified based on each state’s grant 

management policies. DOT plans to pilot the project in more volunteer 

states in fiscal year 2006 and extend the process nationwide in fiscal year 

2007. In addition to participating in the pilot, states work to reduce 

improper payments by implementing computer software to detect fraud 

and abuse. One such tool is the Transportation Software Management 

Solution, which was used by several state programs in their Highway 

Planning and Construction programs and contains a Bid Analysis 

Management System that allows highway agencies to analyze bids for 

collusion. At the federal level, DOT improper payment initiatives for the 

future include citing the inherent higher risk of improper payments 

because of concentrated and accelerated spending related to Hurricanes 

Katrina and Rita. Fiscal year 2006 Highway Planning and Construction 

Program testing will be focused on these hurricane regions. In its fiscal 

year 2006 PAR, DOT will provide interim information on the amounts and 

causes of improper payments and control procedures that can be used to 

prevent or detect improper payments in national emergency situations. 
Page 60 GAO-06-347 Improper Payments

Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project ApendxiVI

Overview of Program Title XIX of the Social Security Act authorizes states to provide health care 

services to low-income individuals and families through the Medicaid 

program. Although jointly financed by the states and the federal 

government, Medicaid is administered directly by the states. Within broad 

federal guidelines, each state establishes its own eligibility standards; 

determines the type, amount, duration, and scope of covered services; and 

sets payment rates. 

The Centers for Medicare and Medicaid Services (CMS), an agency under 

HHS, has the role of facilitating states’ program integrity efforts and seeing 

that states have the necessary processes in place to prevent and detect 

improper payments. In July 2001, CMS began soliciting states to participate 

in Year 1 of the Medicaid Payment Accuracy Measurement (PAM) pilot 

project. CMS continued to administer the PAM pilot until its Year 3 study in 

fiscal year 2004. For fiscal year 2005, CMS modified the pilot to measure 

improper payment error rates rather than payment accuracy, and changed 

the name of the pilot from PAM to Payment Error Rate Measurement 

(PERM). Table 8 shows the number of states that participated in the pilot 

each year.

Table 8: Number of States Participating in CMS’s Medicaid Pilots to Estimate 

Improper Payments

Source: CMS. 

In Year 2 of the pilot, CMS adopted a standard methodology for the states 

to use. Specifically, sampling strata consisting of Medicaid services were 

identified and states could perform sampling for the fee-for-service (FFS)1

Pilot name Number of states participating

PAM Year 1 (FY 2002) 9

PAM Year 2 (FY 2003) 12

PAM Year 3 (FY 2004) 24

PERM Year 1 (FY 2005) 26

1

FFS is a traditional method of payment for medical services under which providers are paid 

for each service rendered.
Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project

Page 61 GAO-06-347 Improper Payments

component, the managed care2 component, or both. The methodology was 

refined for Year 3 to include a subsample for eligibility review. For the fiscal 

year 2005 PERM pilot, CMS set the sample size and provided states the 

following general methodology:

1. Plan the project, including assembling and training staff and collecting 

policies and procedures for reviews.

2. Select a sample of payments and validate the sample. For FFS, the 

sample is a claim or line item, which is a request for payment for 

services rendered relating to the care and treatment of a disease or 

injury. For managed care, the sample is a capitation payment, which is a 

payment based on a predetermined agreement rather than on actual 

cost of care, services delivered, or both.3

3. Conduct a processing review on each claim.

4. Conduct a medical record review on each FFS claim.

5. Conduct an eligibility review on a subsample of claims. 

6. Calculate the overall error rate as well as error rates for the FFS and 

managed care components.

7. Develop a final report.

Improper Payment 

Estimates

Because of the variations in the states’ Medicaid programs, CMS provided 

states the option of either testing for the FFS or managed care components, 

including testing eligibility for the two components. The rates4

 for the 12 

states that participated in the PAM pilot for Year 2 (fiscal year 2003) ranged 

from 0.3 percent to 18.6 percent for the FFS component and 0 percent to 

2

Managed care is any system of delivering health services through a specified network of 

doctors and hospitals that agree to comply with the care approaches established by a caremanagement process.

3

All sampling units, including the FFS line item and managed care capitation payment, are 

referred to as a claim.

4

To determine the states’ error rates, we used the inverse of the accuracy rates published by 

HHS’s CMS.
Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project

Page 62 GAO-06-347 Improper Payments

2.5 percent for the managed care component. The rates for the 24 states 

that participated in the Year 3 PAM pilot (fiscal year 2004) ranged from 0.80 

percent to 54.3 percent for the FFS component and 0 percent to 7.45 

percent for the managed care component. Rates for the Year 1 PERM pilot 

(fiscal year 2005) had not been published at the conclusion of our 

fieldwork.

Although all states used a standard methodology to produce the rates, CMS 

noted that these rates should not be compared among states. Specifically, 

states applied different administrative standards that resulted in a lack of a 

common approach to the reviews among states. For medical reviews, 

states have different policies against which the reviews are conducted. For 

eligibility reviews, states had two review options under the PAM Year 3 

pilot for verifying program eligibility. Other differences include the level of 

provider cooperation in submitting information and whether states 

conducted reviews in-house or contracted with vendors to perform the 

reviews. 

CMS identified Texas as having a leadership role in estimating improper 

payments for its Medicaid program. Texas was estimating improper 

payments prior to implementing the CMS pilots. Under state statute, 

effective 1997, Texas was required to biennially estimate improper 

payments for its Medicaid program. In September 2003, the state of Texas 

passed another statute, among other things, to fund 200 additional 

positions to investigate Medicaid fraud. Texas has also initiated a Medicaid 

Integrity Pilot (MIP) project to assist in preventing improper payments. The 

MIP project incorporates the use of biometric technology, such as 

fingerprint imaging and smart cards,5

 as eligibility verification tools. For 

example, Texas issues smart cards to Medicaid clients participating in the 

pilot and smart card and biometric readers to medical providers. When a 

client obtains services, he or she inserts the card into the smart card reader 

and positions his or her finger on the biometric reader, which compares the 

print to the fingerprint image contained on the card. The use of this type of 

technology promotes positive identification, incorporates automated 

eligibility determination, and assists in an electronic billing process. 

5

Smart cards can contain various information, such as client account, biometric, and health 

information. Smart cards can be programmed to be ATM enabled and be used as a source of 

data transmission between providers, pharmacies, and labs.
Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project

Page 63 GAO-06-347 Improper Payments

Furthermore, Texas has performed a feasibility study to consolidate 

multiple program benefits onto a single card called an Integrated Benefits 

Card (IBC). This study has identified four primary benefit programs for 

consolidation—Medicaid; TANF; Food Stamps; and Women, Infants, and 

Children. Texas believes that the IBC may facilitate the needs of the 

Medicaid program by preventing fraud, making payments to medical 

providers more quickly, and offering a means for providers to quickly and 

accurately verify the eligibility of a client.

In addition to the above initiatives, CMS has taken additional steps 

programwide to estimate improper payments at the national level. See 

table 9 for a detailed description of actions taken. 

Table 9: Timeline of CMS Regulations and Initiatives to Estimate Medicaid Improper 

Payments

Date Medicaid improper payment regulation/initiative

Fiscal year 2000 Established payment accuracy Government Performance Results 

Act goals

July 2001 CMS formally solicited states to participate in the PAM Year 1 pilot

May 2002 CMS solicited states to participate in the PAM Year 2 pilot 

November 2002 Enactment of IPIA

December 2002 Issued PAM Year 1 pilot final report (FY 2002)

June 2003 CMS solicited states to participate in the PAM Year 3 pilot

April 2004 Issued PAM Year 2 pilot final report (FY 2003)

July 2004 CMS solicited states to participate in the PERM Year 1pilot

August 27, 2004 Medicaid Program and SCHIP: Payment Error Rate Measurement, 

69 Fed. Reg. 52620-32 (Aug. 27, 2004) (to be codified at 42 C.F.R. 

pts. 431 and 457) 

December 13, 2004 Results of the Year 2 PAM pilot (FY 2003) reported in the FY 2004 

PAR

June 15, 2005 Issued PAM Year 3 pilot final report (FY 2004)

July 22, 2005 Agency Information Collection Activities: Proposed Collection; 

Comment Request, 70 Fed. Reg. 42324-CMS-10166 

August 26, 2005 Agency Information Collection Activities: Submission for OMB 

Review; Comment Request, 70 Fed. Reg. 50357-CMS-10166 

October 5, 2005 Medicaid Program and SCHIP: Payment Error Rate Measurement, 

70 Fed. Reg. 58260-77 (Oct. 5, 2005) (to be codified at 42 C.F.R. 

pts. 431 and 457) 

November 15, 2005 Results from Year 3 PAM pilot (FY 2004) were reported in the FY 

2005 PAR
Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project

Page 64 GAO-06-347 Improper Payments

Sources: GAO and CMS.

Note: Shading represents future actions.

State and Federal 

Improper Payment 

Initiatives Under Way

In October 2005, CMS published an interim final rule, with plans to publish 

a final rule that would include responses to comments received. According 

to the interim final rule, states would be stratified based on the states’ 

annual FFS Medicaid expenditures from the previous year, and a random 

sample of up to 18 states would be reviewed. States would only be selected 

once every 3 years. The interim final rule also outlines the strategy for 

conducting medical and data-processing reviews on claims made for FFS 

only. CMS will address estimating improper payments for Medicaid’s 

managed care and eligibility components at a later time. In November 2005, 

CMS sent a memo to the states selected for review during fiscal year 2006. 

Subsequent to the publication of the October 2005 interim final rule, CMS 

stated that it anticipates the number of states selected each year will be 17 

to ensure that each state and the District of Columbia would only be 

selected once every 3 years. This approach would exclude any U.S. 

territories or possessions that receive Medicaid funds. In a discussion with 

CMS’s consultant firm, it communicated to us that the sampling approach 

to be employed was statistically valid since every state was selected by 

strata, for each of the 3 years, in year 1 of this process, and thus, each state 

had an equal chance of being selected for years 1 through 3. Because CMS’s 

sampling methodology, including sampling plans, had not been fully 

documented by the conclusion of our fieldwork, we were unable to 

independently assess the statistical validity of CMS’s approach to obtain a 

national improper payment estimate for its Medicaid program. 

In its fiscal year 2005 PAR, HHS also identified efforts to detect and reduce 

improper payments through activities other than the pilot project. For 

example, HHS’s Health Care Fraud and Abuse Control Office has two 

projects under way that will assist in reporting improper payments. The 

office plans to hire 100 staff to conduct prospective reviews of state 

Fiscal year 2006 Results of the PERM pilot will be reported in the FY 2006 PAR 

Fiscal year 2007 Results of the FY 2006 national Medicaid FFS error rate will be 

reported in the FY 2007 PAR, based on a statistically valid sample 

of states and claims within those states

Fiscal year 2008 Results of the FY 2007 federal contractor estimate of a national 

error rate for Medicaid’s FFS, managed care, and eligibility 

components will be reported in the FY 2008 PAR

(Continued From Previous Page)

Date Medicaid improper payment regulation/initiative
Appendix VI

Medicaid Payment Accuracy and Payment 

Error Rate Measurement Project

Page 65 GAO-06-347 Improper Payments

Medicaid operations and the Medicare/Medicaid data match program6 to 

identify areas where efficiencies could be made to enhance payment 

accuracy. Additionally, HHS expects to improve its data match capabilities 

to detect improper payments for Medicaid, as well as other programs, 

through the use of its Public Assistance Reporting Information System 

(PARIS). PARIS is a voluntary project that enables the 33 participating 

states’ public assistance data to be matched against several databases to 

help maintain program integrity and to detect and deter improper 

payments. CMS expects to be fully compliant with the IPIA requirements 

for its Medicaid program by fiscal year 2008. 

6

In the Medicare/Medicaid data match program, claims data from both programs are 

analyzed together to detect patterns that may not be evident when billings for either 

program are viewed separately. This data match allows CMS to identify previously 

undetected patterns, such as providers who bill the government for more than 24 hours a 

day in both programs.
Page 66 GAO-06-347 Improper Payments

Appendix VII

Comments from the Office of Management 

and Budget ApendxiVI
Appendix VII

Comments from the Office of Management 

and Budget

Page 67 GAO-06-347 Improper Payments
Appendix VII

Comments from the Office of Management 

and Budget

Page 68 GAO-06-347 Improper Payments
Page 69 GAO-06-347 Improper Payments

Appendix VIII

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact McCoy Williams, (202) 512-9095 or williamsm1@gao.gov

Acknowledgments In addition to the contact named above, Carla Lewis, Assistant Director; 

Verginie Amirkhanian; Francine DelVecchio; Louis Fernheimer; Danielle 

Free; Wilfred Holloway; Stuart Kaufman; Donell Ries; and Bill Valsa made 

important contributions to this report.
Page 70 GAO-06-347 Improper Payments

Related GAO Products

Financial Management: Challenges Continue in Meeting Requirements 

of the Improper Payments Information Act. GAO-06-581T. Washington, 

D.C.: April 5, 2006.

Financial Management: Challenges Remain in Meeting Requirements of 

the Improper Payments Information Act. GAO-06-482T. Washington, D.C: 

March 9, 2006.

Financial Management: Challenges in Meeting Governmentwide 

Improper Payment Requirements. GAO-05-907T. Washington, D.C.: 

July 20, 2005.

Financial Management: Challenges in Meeting Requirements of the 

Improper Payments Information Act. GAO-05-605T. Washington, D.C.: 

July 12, 2005.

Food Stamp Program: States Have Made Progress Reducing Payment 

Errors, and Further Challenges Remain. GAO-05-245. Washington, D.C.: 

May 5, 2005.

Financial Management: Challenges in Meeting Requirements of the 

Improper Payments Information Act. GAO-05-417. Washington, D.C.: 

March 31, 2005.

Medicaid Program Integrity: State and Federal Efforts to Prevent and 

Detect Improper Payments. GAO-04-707. Washington D.C.: July 16, 2004.

TANF and Child Care Programs: HHS Lacks Adequate Information to 

Assess Risk and Assist States in Managing Improper Payments. GAO-04-

723. Washington, D.C.: June 18, 2004.

Financial Management: Fiscal Year 2003 Performance and 

Accountability Reports Provide Limited Information on 

Governmentwide Improper Payments. GAO-04-631T. Washington, D.C.: 

April 15, 2004.

Financial Management: Status of the Government Efforts to Address 

Improper Payment Problems. GAO-04-99. Washington, D.C.: October 17, 

2003.
Related GAO Products

Page 71 GAO-06-347 Improper Payments

Financial Management: Effective Implementation of the Improper 

Payments Information Act of 2002 Is Key to Reducing the Government’s 

Improper Payments. GAO-03-991T. Washington, D.C.: July 14, 2003.

Financial Management: Challenges Remain in Addressing the 

Government’s Improper Payments. GAO-03-750T. Washington, D.C.: 

May 13, 2003.

Financial Management: Coordinated Approach Needed to Address the 

Government’s Improper Payments Problems. GAO-02-749. Washington, 

D.C.: August 9, 2002.

Unemployment Insurance: Increased Focus on Program Integrity Could 

Reduce Billions in Overpayments. GAO-02-697. Washington, D.C.: July 12, 

2002.

Financial Management: Improper Payments Reported in Fiscal Year 

2000 Financial Statements. GAO-02-131R. Washington, D.C.: November 2, 

2001.

Strategies to Manage Improper Payments: Learning From Public and 

Private Sector Organizations. GAO-02-69G. Washington, D.C.: October 

2001.

Financial Management: Billions in Improper Payments Continue to 

Require Attention. GAO-01-44. Washington, D.C.: October 27, 2000.

(195043)
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