GAO-06-1067R Posthearing Questions 

United States Government Accountability Office

Washington, DC 20548 

September 6, 2006 

The Honorable Tom Coburn 

Chairman, Subcommittee on Federal Financial Management, Government 

 Information, and International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

Subject: Improper Payments: Posthearing Questions Related to Agencies 

Meeting the Requirements of the Improper Payments Information Act 

of 2002

Dear Mr. Chairman: 

On March 9, 2006, we testified1

 before your subcommittee at a hearing entitled, 

“Reporting Improper Payments: A Report Card on Agencies’ Progress.” At the 

hearing, we discussed our findings on federal agencies’ challenges in meeting the 

requirements of the Improper Payments Information Act (IPIA) of 2002 based on our 

review of agencies’ fiscal year 2005 performance and accountability reports (PAR) 

and annual reports. Our review focused on the extent to which agencies have 

performed the required assessments to identify programs and activities that were 

susceptible to significant improper payments, the annual amount estimated by the 

reporting agencies, and the amount of improper payments recouped through recovery 

audits. 

This letter responds to your June 15, 2006, request that we provide answers to followup questions relating to our March 9, 2006, testimony. Your questions, along with our 

responses, follow. 

1. The Department of Homeland Security reported that it had assessed all 

programs and activities and found none to be susceptible to making significant 

improper payments. Their independent auditor reported that the Department 

did not institute a systematic method of reviewing all programs and 

 

1

GAO, Financial Management: Challenges Remain in Meeting Requirements of the Improper 

Payments Information Act, GAO-06-482T (Washington, D.C.: Mar. 9, 2006). 
identifying those it believed were susceptible to significant improper payments. 

This was the second year in a row that the auditor reported IPIA 

noncompliance for DHS. What concerns does GAO have regarding not only DHS’ 

inability to comply with the Improper Payments Information Act; but on a 

greater scale with their overall financial management? 

The Department of Homeland Security (DHS) continues to face challenges in 

meeting the requirements of IPIA as well as experience significant financial 

management weaknesses. For fiscal year 2005, DHS received a disclaimer of

opinion2

 on its fiscal year 2005 balance sheet and fiscal year 2004 consolidated 

financial statements, primarily due to financial reporting problems.3

As context, DHS’s auditors cited 10 material internal control weaknesses over 

areas such as financial management oversight; financial systems security; 

property, plant, and equipment; and accounts payable and disbursements. For 

example, agency auditors reported that DHS had not established sufficient 

controls to prevent duplicate payments to vendors related to prior year 

obligations or adopted policies to ensure receipt of goods and services prior to

payment of invoices. In addition, DHS had not provided effective management and 

oversight to ensure corrective action plans were developed, implemented (with

progress tracked), and successfully completed to support the elimination of 

material weaknesses and achieve consistent, timely, and reliable financial 

reporting departmentwide. Furthermore, the auditors found seven instances of 

noncompliance with applicable laws and regulations, one of those being 

noncompliance with IPIA. Specifically, for a second year in a row, its auditors 

found that DHS did not institute a systematic method of reviewing all programs 

and identifying those that are susceptible to significant erroneous payments.4

 The 

auditors also reported that DHS did not perform test work to evaluate improper 

payments for all material programs for fiscal year 2005. DHS’s testing approach

only included a review of its programs with total disbursements exceeding 

$100 million for each agency component. DHS reported that programs with fewer 

disbursements were assumed to be too small to exceed the Office of Management 

and Budget’s (OMB) reporting threshold of $10 million in improper payments. 

 

DHS, like other federal agencies, has a stewardship obligation to prevent fraud, 

waste, and abuse; to use tax dollars appropriately; and to ensure financial 

 2

A disclaimer of opinion means that the auditor does not express an opinion on the financial 

statements. This type of opinion is appropriate when the audit scope is not sufficient to enable the

auditor to express such an opinion or when there are material uncertainties involving scope 

limitations. 

3

DHS’s auditors reported that they were engaged to audit the accompanying consolidated balance 

sheets of DHS as of September 30, 2005 and 2004, and the related consolidated statements of net cost, 

changes in net position, and financing; combined statement of budgetary resources; and statement of

custodial activity for the year ended September 30, 2004. The auditors were not engaged to audit the 

accompanying consolidated statements of net cost, changes in net position, and financing; combined 

statement of budgetary resources; and statement of custodial activity for the year ended September 30,

2005. 

4

We consider the terms “erroneous payments” and “improper payments” to be synonymous. 

Page 2 GAO-06-1067R Posthearing Questions 
accountability to the President, Congress, and the American people. Management 

must establish effective internal controls to safeguard assets, protect revenue, and 

make authorized payments. Based on our previous work, the basic or root causes 

of improper payments can typically be traced to a lack of or breakdown in 

internal control. While DHS did not identify any of its programs or activities 

susceptible to significant improper payments, several of its inherited weaknesses 

clearly suggest risk for improper payments. These inherited weaknesses included 

financial accounting system design and operation limitations; lack of adequate 

accounting systems and processes to ensure property, plant, and equipment were 

properly recorded; and lack of policies and procedures to monitor contractor 

costs and performance. 

Our recent testimonies5

 on select DHS programs further validate our position. 

Specifically, from our review of DHS’s Individuals and Households program 

related to Hurricanes Katrina and Rita disaster relief efforts, we estimated that 

between $600 million and $1.4 billion in improper and potentially fraudulent 

individual assistance payments had been made. Similarly, our recent testimony on 

DHS’s purchase card program identified a weak control environment and 

ineffective internal control activities that allowed potentially fraudulent, 

improper, and abusive or questionable transactions to occur. DHS must continue 

to focus on resolving weaknesses and developing strong internal controls to 

overcome its financial management challenges. 

2. The following agencies reported in their fiscal year 2005 Performance and 

Accountability Report that they had no programs susceptible to significant 

improper payments: 

• The Department of Commerce (Commerce)

• The General Services Administration (GSA) 

• The Department of Homeland Security (DHS) 

• The Department of the Interior (Interior) 

• The Department of Justice (Justice) 

• National Aeronautics and Space Administration (NASA) 

• The Nuclear Regulatory Commission (NRC) 

• The Securities and Exchange Commission (SEC) 

Please comment on any of the above agencies with which GAO has concerns. 

While we provided data on the above agencies’ implementation efforts to annually 

review all programs and activities as required under IPIA, we have not analyzed 

their methodologies for conducting risk assessments to identify those programs 

and activities susceptible to significant improper payments. That said, 

noncompliance issues related to IPIA and agencies’ existing financial management 

 5

GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially Fraudulent 

Individual Assistance Payments Estimated to Be Between $600 Million and $1.4 Billion, GAO-06-

844T (Washington, D.C.: June 14, 2006) and Purchase Cards: Control Weaknesses Leave DHS Highly 

Vulnerable to Fraudulent, Improper, and Abusive Activity, GAO-06-957T (Washington, D.C.: July 19, 

2006). 

Page 3 GAO-06-1067R Posthearing Questions 
challenges raise questions regarding these agencies’ assertions that they had no 

programs susceptible to significant improper payments. As we testified at the 

March 9 hearing, auditors for DHS and Justice cited agency noncompliance with 

IPIA, primarily caused by inadequate risk assessments. 

In addition, other agency auditors have reported major management challenges 

that can hinder effective internal control. For example, at Interior, its auditor 

reported major management challenges in the agency’s Workers Compensation

Program. Specifically, the auditors found that (1) Interior’s inefficient and 

ineffective management led to increases in the program’s annual costs; (2) the 

program was understaffed, employees lacked training, and there was no uniform 

process for ensuring that costs are accurate; and (3) there was an overwhelming 

lack of awareness that workers’ compensation fraud existed. The auditors also 

reported that, at best, the program was managed inconsistently and, at worst, was 

subject to abuse by managers seeking an easy way to deal with problem 

employees. 

Internal control serves as the first line of defense in safeguarding assets and 

preventing and detecting errors, fraud, waste, abuse, and mismanagement. Strong 

systems of internal control provide reasonable assurance that programs are 

operating as intended and are achieving expected outcomes. A lack of strong 

internal control was evident in at least three of the eight agencies listed above that 

reported no programs were susceptible to significant improper payments. DHS, 

GSA, and NASA reported they have no risk susceptible programs, yet each of 

these agencies received a disclaimer of opinion on their fiscal year 2005 financial 

statement audits due to significant financial reporting deficiencies. In addition, 

agency auditors identified a total of 47 reportable conditions6

 related to internal

control weaknesses found during the eight agencies’ financial statement audits.7 

Weaknesses identified during a financial statement audit could materially affect

an agency’s program operations and thus, significantly increase the risk of making 

improper payments. 

For example, at NRC, agency auditors identified four reportable conditions during 

their examination of the effectiveness of NRC’s internal control over financial 

reporting. One of these reportable conditions related to financial controls over 

disbursements. Specifically, auditors found that NRC lacked verification controls 

to review the propriety of edits made to vendor tables which house information 

such as the vendor name, address, tax identification number, and bank routing 

numbers. Verifying such edits helps to ensure the existence of the vendor prior to 

payment, decreasing the risk of improper payments to phantom vendors. The 

auditors also reported that NRC does not have controls in place for review and 

approval of high-value payments to nonfederal entities, ranging from amounts in 

 6

Reportable conditions are matters coming to an auditor’s attention that, in their judgment, should be

communicated because they represent significant deficiencies in the design or operation of internal

control that could adversely affect the federal government’s ability to meet the internal control 

objectives described in the audit report. 

7

The number of reportable conditions for each of the eight agencies ranged from 2 to 14. 

Page 4 GAO-06-1067R Posthearing Questions 
excess of $250,000 to $300,000. Payments in the high-value category are not 

reviewed any differently than payments with lower dollar values. During their 

internal control testing, the auditors identified one improper payment in excess of 

$1 million, which had not been detected by NRC. The auditors made four 

recommendations to NRC to strengthen controls over its disbursements. Going 

forward, agency management at this agency and the other seven agencies listed 

above will need to ensure their risk assessment methodologies measure the 

potential or actual effect of major management challenges and internal control 

weaknesses identified from financial statement audits in order to assist in 

identifying programs and activities susceptible to significant improper payments. 

3. Should “unavoidable overpayment” statistics at the Social Security

Administration be reported to the Office of Management and Budget? Why 

would this be important, and how could the Social Security Administration 

implement such a process?

 

As we previously reported to your subcommittee,8

 OMB has allowed the Social 

Security Administration (SSA) to exclude from its estimate of improper payments 

those payments that it had to make following constitutional, statutory, or judicial 

requirements even though those payments are subsequently determined to be 

incorrect.9

 OMB deemed these types of payments to be “unavoidable” improper 

payments,10 as there are no administrative changes SSA could implement that 

would eliminate the requirement to make such payments. Although the definition

of improper payments does not use the terms “avoidable”11 or “unavoidable,” we 

agree with OMB that a payment that was made because of a legal requirement to 

make the payment, subject to subsequent determinations that the payment is not 

due, should not be included in an agency’s estimate of its improper payments 

because it does not meet the definition of an improper payment under the act. 

Currently, SSA does not track or publicly report on these types of payments. In 

addition, OMB has reported that it is not aware of other agencies that are similarly 

legislatively mandated to make these types of payments nor does OMB require 

governmentwide reporting of these types of payments. Because agencies are not 

currently required to track, monitor, and report these types of payments on a 

governmentwide basis, the magnitude of this issue is unknown. 

 8

GAO, Post-Hearing Questions Related to Agency Implementation of the Improper Payments 

Information Act, GAO-05-1029R (Washington, D.C.: Sept. 16, 2005). 

9

IPIA defines an improper payment as a payment that should not have been made or that was made in 

an incorrect amount (including overpayments and underpayments) under statutory, contractual,

administrative, or other legally applicable requirements, and includes any payment to an ineligible

recipient, any payment for an ineligible service, any duplicate payment, any payment for services not 

received, and any payment that does not account for credit for applicable discounts. 

10OMB defines “unavoidable” payments as payments resulting from legal or policy requirements. 

11OMB defines “avoidable” payments as payments that could be reduced through changes in

administrative actions. 

Page 5 GAO-06-1067R Posthearing Questions 
4. As you know, the Subcommittee is committed to rigorously overseeing USAID 

and some of its programs. In a written question to Linda Combs following last 

July’s improper payments hearing, I asked whether or not OMB supported 

USAID’s internal assessment that none of their programs were considered to be 

at risk for “significant” improper payments. Her response deemed USAID’s 

documentation for fiscal year 2004 as acceptable, and stated their intentions to 

re-evaluate their risk assessments in the fiscal year 2005 Performance and 

Accountability Report to determine their acceptability. According to GAO’s 

report, USAID was silent as to whether it had programs that are susceptible to 

making significant improper payments.

a) What concerns does GAO have with the Agency for International 

Development’s (USAID) reporting on improper payments? 

As with other agencies, it is important for USAID to fulfill the requirements of 

IPIA and report the applicable improper payments information in its PAR. As 

stated in IPIA and OMB’s implementing guidance, each agency shall annually 

review all programs and activities that it administers and identify all such 

programs and activities that may be susceptible to significant improper payments. 

For fiscal year 2005, USAID reported limited improper payment information in its 

PAR. From our review, we found no assertions from USAID that it had assessed 

all programs and activities for susceptibility to significant improper payments. A 

risk assessment is a key step in gaining assurance that programs are operating as 

intended and that they are achieving their expected outcomes. It entails a 

comprehensive review and analysis of program operations to determine where 

risks exist, what those risks are, and the potential or actual effect of those risks 

on program operations. The information developed during a risk assessment 

forms the foundation or basis upon which management can determine the nature 

and type of corrective actions needed. It also gives management baseline 

information for measuring progress in reducing improper payments. USAID only 

reported that it continues to monitor all its programs and payment activities. 

Because USAID’s PAR lacks details about the monitoring activities it reportedly 

performed, we are uncertain as to whether this meets the above requirement to

perform a risk assessment. 

In fact, there were five programs that did not provide sufficient reporting on 

improper payments in their fiscal year 2005 Performance and Accountability

Report: USAID, the Export-Import Bank, the Pension Benefit Guarantee 

Corporation, the Postal Service, and the Smithsonian.

b) Does GAO have any concerns with the rest of these agencies and their 

failure to report improper payment information? 

Any agencies’ failure to report improper payment information as required by the 

act is of great concern. For example, the Postal Service’s Office of Inspector 

General (OIG) reported that for fiscal year 2005 it had identified $75 million in 

questioned costs, $261 million in funds that could have been put to better use, and 

$11 million in unrecoverable costs. The OIG further reported fines, restitutions, 

and recoveries of $66 million. These OIG findings suggest that the agency may not 

be adequately assessing all of its programs and activities for significant improper 

Page 6 GAO-06-1067R Posthearing Questions 
payments. In meeting the requirements of the act, the Postal Service, as well as 

other agencies, should report on their risk assessment activities and explicitly 

state whether the results of the risk assessment identified programs and activities 

susceptible to significant improper payments.

Since fiscal year 2000, our work has demonstrated that improper payments are a 

long-standing, widespread, and significant problem in the federal government. 

Transparency in reporting improper payments is crucial at both the federal agency 

and governmentwide levels. Public reporting helps establish accountability as 

well as expectations for improvements. This includes holding agencies 

accountable for achieving target rates or otherwise implementing specifically 

planned actions. Annually identifying, estimating, and publicly reporting progress 

made to reduce improper payments enables agencies and others with oversight 

and monitoring responsibilities to measure this progress and determine whether 

further action is needed to minimize future improper payments. 

5. As you know, the improper payments made in the Earned Income Tax Credit 

makes up the second largest portion of government-wide improper payments for 

fiscal year 2005, estimating $9.6 to $11.4 billion dollars paid improperly. 

In fiscal year 2004 EITC had an improper payment rate of 25 percent. For 

fiscal year 2005, it was 28 percent and this is on the low side, because it’s just 

an estimate. This program does not just need help, it needs a complete overhaul, 

with an improper payment rate that high. 

I am familiar with the legislative proposals in the President’s fiscal year 2007 

Budget. OMB believes that if enacted, this proposal would save $232 million in 

the first year and $5 billion over ten years. That seems a bit under-ambitious 

when EITC is making at least $10 billion in improper payments every year. In 

other words, with improper payments of $100 billion over 10 years, why are 

you [OMB] projecting only to reduce that number by 5 percent? Mr. Williams, 

has GAO done any analysis of the President’s proposals? If so, what is the 

GAO’s assessment? Has GAO made any recommendations regarding the 

administration and financial controls in the EITC program? 

To date, we have not performed an analysis or an assessment of the President’s 

legislative proposals as they relate to the Earned Income Tax Credit (EITC) 

program. Regarding any recommendations made, since fiscal year 2001, we have 

issued three reports that included seven recommendations related to the 

administration and financial controls in the EITC program. (See table 1.)

Page 7 GAO-06-1067R Posthearing Questions 
Table 1: GAO Recommendations since Fiscal Year 2001 Related to the 

EITC Program 

GAO report 

number GAO findings 

GAO recommendations related to the 

EITC program Status of recommendations 

GAO-05-221a Of the 12 federal means-tested programs 

reviewed, including the EITC program, we 

found that information on participants’ 

eligibility and particular recipient groups 

can help program managers more 

effectively address issues related to 

program access. With regard to the EITC 

program, we found that the Internal 

Revenue Service (IRS) does not: (1) use 

rate information as a performance 

measure or (2) include rate information in 

its performance report or other key 

program reports.

As participation rate estimates are

developed to use as program 

performance measures for the EITC 

program, we recommended that steps 

be taken to quantify errors that may 

result from estimating EITC participation 

rate estimates to help users better 

understand the accuracy of the data and 

ensure that estimates will be 

comparable over time. 

The recommendation is open. 

GAO-05-92 b We found that IRS’s implementation of 

tests to address the leading sources of 

EITC errors was not well documented 

and the level and quality of some 

services provided to test participants 

were not measured. 

We made four recommendations to (1) 

ensure the rationale for key decisions is 

documented, (2) obtain information on 

the quality and use of all types of 

taxpayer assistance, (3) clearly state 

limitations when disseminating results, 

and (4) complete development of 

detailed evaluation plans for the 2005 

tests. 

The first two recommendations 

are closed. The remaining two 

recommendations are open. 

GAO-01-42cWhile IRS has made improvements since 

we began auditing its financial statements 

in fiscal year 1992, serious internal

control and financial and operational 

system weaknesses continued to affect 

the agency’s ability to effectively manage 

its operations and produce reliable 

financial statement information during 

fiscal year 1999.

We made two recommendations to (1) 

determine why service centers have 

been ineffective in stopping refunds 

associated with questionable EITCs, 

and (2) develop reliable cost/benefit 

data, using the best available 

information from the screening and 

examination of EITC claims, to estimate 

the tax revenue collected by, and the 

amount of improper refunds returned to, 

IRS for each dollar spent pursuing these 

outstanding amounts. 

The first recommendation is 

closed. The second 

recommendation is open. 

Source: GAO.

a

GAO, Means-Tested Programs: Information on Program Access Can Be an Important Management 

Tool, GAO-05-221 (Washington, D.C.: Mar. 11, 2005). 

b

GAO, Earned Income Tax Credit: Implementation of Three New Tests Proceeded Smoothly, But 

Tests and Evaluation Plans Were Not Fully Documented, GAO-05-92 (Washington, D.C.: Dec. 30,

2004). 

c

GAO, Internal Revenue Service: Recommendations to Improve Financial and Operational 

Management, GAO-01-42 (Washington, D.C.: Nov. 17, 2000).

6. The Department of Labor has reduced improper payments in its Unemployment 

Insurance program by about $600 million between 2004 and 2005. OMB 

reports that this is more than a 15 percent decrease in the error rate for this

program since last year’s reporting. A 15 percent reduction is a significant 

accomplishment. 

a) How can the Department of Labor’s successes be carried over to other 

agencies? b) If the Department of Labor has had this much success in reporting 

and reducing improper payments, shouldn’t other federal-state partnered 

programs like Temporary Assistance for Needy Families (TANF), Medicaid, 

Page 8 GAO-06-1067R Posthearing Questions 
Foster Care, Child Care, State Children’s Health Insurance Program (SCHIP), 

School Programs and Women, Infants and Children (WIC) be able to coordinate 

between the federal and state authorities to develop an improper payment 

estimate? 

In our April 2006 report,12 we highlighted that federal and state coordination was 

needed to develop improper payment estimates for federal programs administered 

at the state level, including some of the programs included in your question. Stateadministered programs and other nonfederal entities receive over $400 billion 

annually in federal funds. Thus, federal agencies and states share a responsibility 

for the prudent use of these funds. One of the reasons the Department of Labor 

(Labor) has been able to report an improper payment estimate for its 

Unemployment Insurance (UI) program is because of a federal requirement13 in 

place that mandates that Labor measure each state’s payment accuracy rate. To 

address this requirement, Labor implemented the Benefit Accuracy Measurement 

(BAM) program, which 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. In 

addition to the federal requirement

14 in place that states must adhere to for 

estimating improper payments, Labor has attributed its successes to the support 

and commitment from top management to facilitate successful implementation of 

IPIA and excellent working relationships with the states.

There are several key initiatives that federal agencies with state-administered 

programs should employ to fulfill the requirements of IPIA, such as establishing a 

culture of accountability, developing a system to collect program information at 

the state level for estimating improper payments, and monitoring program 

performance to determine if desired program outcomes have been achieved. 

These key initiatives are aligned with our Standards of Internal Control15 and 

executive guide16 on strategies to manage improper payments. Among the 

standards that are directly linked to the above key initiatives are the following: 

 12GAO, Improper Payments: Federal and State Coordination Needed to Report National Improper 

Payment Estimates on Federal Programs, GAO-06-347 (Washington, D.C.: Apr. 14, 2006).

13Part 602 of Title 20, U.S. Code of Federal Regulations. 

14We have previously reported that only the Food Stamps and Unemployment Insurance programs had 

federal requirements for all states to annually estimate improper payments. See GAO-06-347.

15GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington,

D.C.: November 1999). 

 

16GAO, Strategies to Manage Improper Payments: Learning From Public and Private Sector 

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

Page 9 GAO-06-1067R Posthearing Questions 
• Control environment—creating a culture of accountability by establishing a 

positive and supportive attitude toward improvement and the achievement of 

established program outcomes. 

• 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. 

As we previously reported,17 measuring improper payments and designing and 

implementing actions to reduce or eliminate them are not easy tasks, particularly 

for grant programs that rely on high-quality administration efforts at the state, 

grantee, or subgrantee level. Given states’ involvement in determining eligibility 

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

reporting on IPIA requirements. Communication, coordination, and cooperation 

among federal agencies and the states will be critical factors in estimating 

improper payment rates and meeting IPIA reporting requirements for stateadministered programs. 

7. There is some confusion on whether or not the Community Development Block 

Grant Program (CDBG) is required to report improper payments. It was one of 

the original programs on the President’s Management Agenda, so it’s been 

required to report since 2001. It is also required to report under the Improper 

Payments Information Act, but is not reporting under [either] requirements. In 

other hearings held by this Subcommittee as well as in written responses to 

letters sent by me and Senator Carper, the Department of Housing and Urban 

Development (HUD) has denied that they are out of compliance with the 

Improper Payments Information Act. The CDBG program is required to report 

under IPIA. Is GAO concerned that CDBG’s outlays are $5.4 billion, and not 

only are they not reporting, they have claimed that they are in compliance? 

In its fiscal year 2005 PAR, HUD reported that based on completed testing of fiscal 

year 2003 payments, the CDBG program was below OMB’s threshold for 

significant improper payments and, therefore, was removed from HUD’s at-risk 

inventory. As such, HUD stated that this program was not subject to retesting 

unless there was a significant change in the nature of activity or internal control 

structure. We have several problems with HUD’s position. First, CDBG was 

 17GAO-05-1029R. 

Page 10 GAO-06-1067R Posthearing Questions 
subject to the previous OMB Circular No. A-11 requirements18 and thus was 

required by OMB’s guidance to continue to report improper payment information 

under IPIA, regardless of the agency-determined risk level. Second, during a June 

2006 hearing before your subcommittee19 on the CDBG program, HUD’s OIG 

reported on numerous instances of fraudulent, improper, and abusive use of 

program funds identified over a 2-1⁄2 year period based on 35 audits. The HUD OIG 

reported that its office has recovered over $120 million in program funds, 

identified over $100 million in questioned costs, indicted 159 individuals, initiated 

administrative actions against 143 individuals, and took 5 civil actions and 39 

personnel actions. As evident by the HUD OIG reviews, the CDBG program may 

be at risk of making improper payments. 

- - - - - - 

We are sending a copy of this report to the Director of OMB and other interested 

parties. This report is also available on GAO’s home page at http://www.gao.gov. 

Should you have any questions on matters discussed in this report or need additional 

information, please contact me at (202) 512-9095 or at williamsm1@gao.gov. Contact 

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

the last page of this report. Major contributors to this report include Carla Lewis, 

Assistant Director; James Maziasz, and Donell Ries. 

Sincerely yours, 

McCoy Williams 

Director, Financial Management and Assurance 

(195093) 

 18Prior to the governmentwide IPIA reporting requirements beginning with fiscal year 2004, former 

section 57 of OMB Circular No. A-11, required certain agencies to submit similar information, including

estimated improper payment target rates, target rates for future reductions in these payments, the 

types and causes of these payments, and variances from targets and goals established. In addition, 

these agencies were to provide a description and assessment of the current methods for measuring the 

rate of improper payments and the quality of data resulting from these methods. 

19June 29, 2006 hearing before the Senate Subcommittee on Federal Financial Management,

Government Information, and International Security, Committee on Homeland Security and 

Governmental Affairs. 

Page 11 GAO-06-1067R Posthearing Questions 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER