```

[Senate Report 107-333]
[From the U.S. Government Publishing Office]

107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-333

======================================================================

                                     

                   IMPROPER PAYMENTS INFORMATION ACT

                                OF 2002

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                               H.R. 4878

 TO PROVIDE FOR ESTIMATES AND REPORTS OF IMPROPER PAYMENTS BY FEDERAL 
                                AGENCIES

                November 4, 2002.--Ordered to be printed

 Filed, under authority of the order of the Senate of October 17, 2002
                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware           ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri              JIM BUNNING, Kentucky
MARK DAYTON, Minnesota               PETER G. FITZGERALD, Illinois
           Joyce A. Rechtschaffen, Staff Director and Counsel
                       Susan E. Propper, Counsel
              Richard A. Hertling, Minority Staff Director
          Mason C. Alinger, Minority Professional Staff Member
                     Darla D. Cassell, Chief Clerk

                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background.......................................................1
 III Discussion of Legislation........................................2
  IV Legislative History..............................................3
  V. Section-by-Section Analysis......................................3
 VI. Evaluation of Regulatory Impact..................................4
VII. CBO Cost Estimate................................................4
VIII.Changes to Existing Law..........................................5

107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-333

======================================================================

 
               IMPROPER PAYMENTS INFORMATION ACT OF 2002

                                _______
                                

                November 4, 2002.--Ordered to be printed

                                _______
                                

 Filed, under authority of the order of the Senate of October 17, 2002

 Mr. Lieberman, from the Committee on Governmental Affairs, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 4878]

    The Committee on Governmental Affairs, to which was 
referred the bill (H.R. 4878) to provide for estimates and 
reports of improper payments by Federal agencies, reports 
favorably thereon with an amendment in the nature of a 
substitute and recommends that the bill as amended do pass.

                         I. PURPOSE AND SUMMARY

    H.R. 4878 as amended requires federal agencies to identify 
programs that are vulnerable to improper payments and to 
estimate annually the amount of underpayments and overpayments 
made by these programs, whether by the agency or through a 
contractor or other third party administering the program. 
``Improper payments'' are defined to include any payments that 
should not have been made or were made in an incorrect amount. 
They include any payments to ineligible recipients, payments 
for an ineligible service, duplicate payments, payments for 
services not received, and payments that do not account for 
credit for applicable discounts. Under H.R. 4878 as amended, 
the agency will have to take steps to reduce the amount of 
improper payments for any program with improper payment 
estimates that exceed $10 million.

                             II. BACKGROUND

    Federal agencies make billions of dollars in improper 
payments each fiscal year. Using estimates voluntarily provided 
by some agencies, the General Accounting Office (GAO) has 
reported that improper payments of between $19 billion and 
$20.7 billion were made in fiscal years 1999, 2000 and 2001. 
According to GAO, these improper payments include ``inadvertent 
errors, such as duplicate payments and calculation errors; 
payments for unsupported or inadequately supported claims; 
payments for services not rendered or rendered to ineligible 
beneficiaries; and payments resulting from fraud and abuse.'' 
Coordinated Approach Needed to Address the Government's 
Improper Payments Problems, GAO-02-749, August 9, 2002, p. 1. 
Since there is no current requirement to report the amount of 
improper payments, GAO believes that these voluntarily-provided 
figures ``do not present a true picture of the level of 
improper payments in federal programs and activities. As 
significant as the $19 billion in improper payments [reported 
for fiscal year 2001] is, the actual extent of improper 
payments government-wide is unknown, is likely to be billions 
of dollars more, and will likely grow in the future without 
concerted and coordinated efforts by agencies, the 
administration, and the Congress.'' Id., p.3.
    In October, 2001, GAO issued an Executive Guide prepared at 
Senator Lieberman's request, Strategies to Manage Improper 
Payments, GAO-02-69G. This Guide provided best practices 
recommendations for federal agencies to consider when 
developing strategies and planning and implementing actions to 
manage improper payments in their programs. A key step 
identified in the Guide is determining the nature and extent of 
the risks of improper payments. This includes estimating the 
total amount of improper payments made, as well as identifying 
the areas of highest risk for such payments so that corrective 
efforts can be aimed at those areas.
    H.R. 4878 begins the process of putting these 
recommendations into practice by requiring that agencies 
annually estimate the amount of improper payments, and report 
on the steps they are taking to reduce the amount of those 
payments in the largest programs.

                     III. DISCUSSION OF LEGISLATION

    H.R. 4878 as amended requires agencies for the first time 
to review annually their programs and activities and identify 
those that may be susceptible to improper payments, using 
guidelines prescribed by the Office of Management and Budget 
(OMB). For each program, the agency must estimate the annual 
amount of improper payments made and submit that estimate to 
Congress. H.R. 4878 as amended also requires agencies to report 
on the steps they are taking to reduce improper payments for 
each program with estimated improper payments that exceed $10 
million and requires OMB to issue guidelines to implement this 
legislation within 6 months after enactment. The requirement to 
estimate and report on improper payments begins with agencies' 
administration of programs in fiscal year 2003; these estimates 
and other required information must be included in agency 
budget submissions for fiscal year 2004 and thereafter.
    The Committee notes that this legislation is intended to 
improve the accountability of federal agencies' administration 
of federal tax dollars. The annual program reviews and 
annualestimates of improper payments should not be construed as a 
requirement for agencies to perform annual payment audits of their 
contractors.

                        IV. LEGISLATIVE HISTORY

    H.R. 4878 was introduced in the House of Representatives by 
Representative Horn on June 6, 2002. The bill was co-sponsored 
by a bipartisan group of Representatives. It was marked up by 
the Subcommittee on Governmental Efficiency, Financial 
Management and Intergovernmental Relations of the Committee on 
Government Reform on June 18, 2002 with a substitute amendment 
offered by Representative Horn that changed the title and 
removed language that would have required agencies to set 
annual goals for reducing improper payments. The bill was 
passed by the House under suspension of the rules on July 9, 
2002 by voice vote.
    The bill was received by the Senate on July 11, 2002 and 
referred to the Committee on Governmental Affairs. At the 
Committee's markup of October 9, 2002, the bill was reported 
out by a roll call vote of 9-0, with a Thompson/Lieberman 
substitute amendment. Members present were Levin, Akaka, 
Durbin, Torricelli, Cleland, Carper, Carnahan, Dayton and 
Lieberman. The substitute makes clear that agencies are to 
report their estimates of improper payments to Congress in a 
uniform manner specified by OMB; revises the threshold for 
identifying programs for which agencies must report the actions 
they have taken; requires that agencies report the causes of 
improper payments, the actions taken to correct those causes 
and the results; and requires OMB to issue its guidance to 
agencies within 6 months after the date the legislation is 
enacted.

                     V. SECTION-BY-SECTION ANALYSIS

    Section 1 entitles the Act as the ``Improper Payments 
Information Act of 2002.''
    Section 2 requires each agency to review annually all 
programs and activities that it administers using guidelines 
prepared by OMB, and identify those programs and activities 
that may be susceptible to improper payments. For each program 
and activity administered by the agency, the agency head shall 
estimate the annual amount of improper payments and submit the 
estimates to Congress by March 31 of the following year, in a 
manner prescribed by OMB. If the agency determines that any 
program or activity has estimated improper payments exceeding 
$10 million, the agency must also report on the actions the 
agency is taking to reduce the improper payments. This report 
must include a discussion of the causes of the improper 
payments, what actions the agency has taken to correct those 
causes and the results achieved. The agency must also state 
whether it has the information systems and other infrastructure 
it needs to reduce improper payments, and if not, what 
resources it has requested in its budget submission. Finally, 
it must report on what steps the agency has taken to hold its 
managers accountable for reducing improper payments.
    Section 2 also defines the terms ``agency,'' ``improper 
payment,'' and ``payment.'' It provides that this legislation 
will apply to agency programs beginning in fiscal year 2003 and 
requires the inclusion of improper payment estimates in agency 
budget submissions for fiscal year 2004 and thereafter. OMB 
must prescribe guidance to implement this legislation no later 
than 6 months after the date of enactment of this Act.

                  VI. EVALUATION OF REGULATORY IMPACT

    Paragraph 11(b)(1) of rule XXVI of the Standing Rules of 
the Senate requires that each report accompanying a bill 
evaluate ``the regulatory impact which would be incurred in 
carrying out this bill.''
    The enactment of this legislation will not have significant 
regulatory impact.

                         VII. CBO COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 23, 2002.
Hon. Joseph I. Lieberman,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4878, the Improper 
Payments Information Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 4878--Improper Payments Information Act of 2002

    H.R. 4878 would require federal agencies, beginning in 
fiscal year 2003, to estimate the amounts of improper payments 
made by federal agencies and programs that are susceptible to 
significant improper payments. For estimates of improper 
payments that exceed $1 million, each agency would prepare a 
report that discusses the causes of the improper payments and 
specific actions taken to correct the problem. In addition, the 
act would designate the Office of Management and Budget as the 
agency responsible for providing guidance to identify improper 
payments.
    CBO estimates that enacting this legislation would not 
significantly affect the federal budget. H.R. 4878 would expand 
on existing measures designed to address waste, fraud, and 
abuse in the Government Performance and Results Act, the 
President's Management Agenda for fiscal year 2002, and OMB 
Circular A-11.
    For most agencies, any impact of H.R. 4878 on spending 
would be subject to the availability of appropriated funds; 
however, the legislation could also affect direct spending by 
agencies not funded through annual appropriations, such as the 
Tennessee Valley Authority and the Bonneville Power 
Administration. CBO estimates, however, that any change in 
spending by these agencies would not be significant.
    H.R. 4878 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. This estimate was approved by Peter H. Fontaine, 
Deputy Assistant Director for Budget Analysis.

                     VIII. CHANGES TO EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that the 
legislation is a free-standing bill that will make no changes 
to any existing law.


```