U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

19–010

" ! SENATE 107TH CONGRESS

2d Session 

REPORT

2002

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


E:\Seals\Congress.#13
(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

ROBERT G. TORRICELLI, New Jersey 

MAX CLELAND, Georgia 

THOMAS R. CARPER, Delaware 

JEAN CARNAHAN, Missouri 

MARK DAYTON, Minnesota 

FRED THOMPSON, Tennessee 

TED STEVENS, Alaska 

SUSAN M. COLLINS, Maine 

GEORGE V. VOINOVICH, Ohio 

THAD COCHRAN, Mississippi 

ROBERT F. BENNETT, Utah 

JIM BUNNING, Kentucky 

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 

2

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 governmentwide 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 annual estimates of improper payments should not be construed as a requirement for 

agencies to perform annual payment audits of their contractors. 

3

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. 

4

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. 

5

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.

Æ