IMPROPER 

PAYMENTS

Actions and Guidance 

Could Help Address 

Issues and 

Inconsistencies in 

Estimation Processes

Report to Congressional Addressees

May 2018

GAO-18-377

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-377, a report to 

congressional addressees

May 2018

IMPROPER PAYMENTS

Actions and Guidance Could Help Address Issues 

and Inconsistencies in Estimation Processes

What GAO Found

The six agencies GAO reviewed reported taking various approaches related to 

key components of estimating improper payments—shown in the figure below—

for 10 selected programs, which collectively reported outlays of over $2.5 trillion 

for fiscal year 2017.

Key Components in the Development of Improper Payment Estimates

Sample selection. Eight of the 10 programs GAO reviewed reported using 

statistically valid approaches, and the remaining 2 reported using alternative

methodologies approved by the Office of Management and Budget (OMB). The

sampled data elements varied, including payments, medical claims, and tax 

returns. The age of the data used to develop fiscal year 2017 improper payment 

estimates also varied, ranging from calendar year 2013 to fiscal year 2017. 

Identification of improper payments. Some of the six agencies reported using

processes designed specifically to estimate improper payments, whereas others

reported leveraging existing reviews. These agencies’ policies and procedures

include a review of aspects of eligibility, except for those related to the 

Department of Defense’s (DOD) Military Pay and the Office of Personnel 

Management’s (OPM) Retirement overpayments. DOD and OPM have not fully 

assessed whether their estimation processes effectively consider key program 

risks. OMB guidance does not specifically address how agencies are to test to 

identify improper payments, such as using a risk-based approach to help ensure 

that key risks of improper payments are addressed.

The six agencies also varied in the treatment of insufficient documentation, both 

in identifying and in reporting the root causes of improper payments. For the

agencies that contact entities outside the agency to estimate improper payments, 

the treatment of nonresponse differed, with one agency including nonresponses 

as improper payments and another generally excluding the nonresponse cases

from review. Although OMB guidance states that agencies should treat cases of 

insufficient documentation as improper payments, it does not specifically address 

the treatment of nonresponse cases.

Calculation of the improper payment estimate. The six agencies generally 

reported using law and OMB guidance to calculate improper payment estimates

for the selected programs, except for the Earned Income Tax Credit (EITC). The 

Internal Revenue Service (IRS) removed overpayments that were recovered 

when developing its estimate. OMB guidance requires agencies to include 

recovered amounts in their estimates. Removing these overpayments 

understates the EITC improper payment estimate and may limit IRS’s ability to 

develop corrective actions to prevent improper payments.

View GAO-18-377. For more information, 

contact Beryl H. Davis at (202) 512-2623 or 

davisbh@gao.gov.

Why GAO Did This Study

Improper payments—which include 

payments that should not have been 

made or were made in an incorrect 

amount—are a long-standing, 

significant problem in the federal 

government, estimated at almost $141

billion for fiscal year 2017. Executive 

branch agencies are required to 

annually estimate improper payments 

for certain programs. Estimation of 

improper payments is key to 

understanding the extent of the 

problem and to developing effective 

corrective actions. Relevant laws and 

guidance provide agencies flexibility in 

developing estimates.

This report describes agencies’

processes to estimate improper 

payments in selected programs for 

fiscal year 2017 and the extent to 

which certain differences in these 

processes can affect the usefulness of 

the resulting estimates. GAO selected 

10 programs across six agencies with 

the largest reported program outlays in 

fiscal years 2015 and 2016. For these 

programs, GAO reviewed relevant laws

and guidance, analyzed agencies’ 

policies and procedures, and 

interviewed officials at relevant

agencies and OMB staff.

What GAO Recommends

GAO recommends that OMB develop 

guidance on treatment of nonresponse 

cases and testing to identify improper 

payments, that DOD and OPM assess 

their estimation processes, and that 

IRS revise its methodology to not 

exclude recovered payments from its 

estimate. All of the agencies either 

agreed or partially agreed with the 

specific recommendations to them.

GAO believes that the actions are

warranted, as discussed in the report.
Page i GAO-18-377 Improper Payments

Letter 1

Background 5

Agency Processes to Estimate Improper Payments Varied, and 

Some Differences May Hinder the Usefulness of the Resulting 

Estimates 9

Conclusions 22

Recommendations for Executive Action 23

Agency Comments and Our Evaluation 24

Appendix I Reported Improper Payment Estimates 

by Agency and Program for Fiscal Year 2017 28

Appendix II Comments from the Office of 

Personnel Management 32

Appendix III Comments from the Department of Defense 34

Appendix IV Comments from the Internal Revenue Service 36

Appendix V GAO Contact and Staff Acknowledgments 39

Tables

Table 1: List of 10 Programs GAO Reviewed for Improper 

Payment Estimation Methodologies 4

Table 2: Summary of the 10 Programs That GAO Reviewed 8

Table 3: Improper Payment Sampling Approaches Used by Six 

Selected Agencies for 10 Programs That GAO Reviewed 10

Table 4: Examples of Population Subsets Excluded from Improper 

Payment Sampling at Selected Agencies 12

Table 5: Testing Processes Used to Estimate Improper Payments 

at Six Selected Agencies 15

Table 6: The Department of Health and Human Services Reported 

Improper Payments Related to Insufficient Documentation 

Contents
Page ii GAO-18-377 Improper Payments

in Fiscal Years 2016 and 2017 for Four Programs GAO 

Reviewed 20

Table 7: Reported Improper Payment Estimates by Agency and 

Program for Fiscal Year 2017 28

Figures

Figure 1: Key Steps Related to Analyzing Improper Payments and 

Major Components in Developing an Improper Payment 

Estimate 6

Figure 2: Range of Data Used by Six Agencies to Develop 

Improper Payment Estimates Reported in Fiscal Year 

2017 Agency Financial Reports for Selected Programs 13
Page iii GAO-18-377 Improper Payments

Abbreviations 

AFR agency financial report

CERT Comprehensive Error Rate Testing

DFAS Defense Finance and Accounting Service

DOD Department of Defense

Education Department of Education

EITC Earned Income Tax Credit

FSA Federal Student Aid

HHS Department of Health and Human Services

IPERA Improper Payments Elimination and Recovery Act of 2010

IPERIA Improper Payments Elimination and Recovery 

Improvement Act of 2012

IPIA Improper Payments Information Act of 2002

IRS Internal Revenue Service

NRP National Research Program

OASDI Old-Age, Survivors, and Disability Insurance

OMB Office of Management and Budget

OPM Office of Personnel Management

PEPV Payment Error related to Prescription Drug Event Data 

Validation

PERM Payment Error Rate Measurement

QA Quality Assurance

RADV Risk Adjustment Data Validation

SSA Social Security Administration

SNAP Supplemental Nutrition Assistance Program

SOP Standard Operating Procedure

USDA Department of Agriculture

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product 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.
Page 1 GAO-18-377 Improper Payments

441 G St. N.W.

Washington, DC 20548

May 31, 2018

Congressional Addressees

Improper payments are a long-standing, significant problem in the federal 

government.1 In fiscal year 2017 alone, estimates of improper payments 

totaled almost $141 billion government-wide.2 The Improper Payments 

Information Act of 2002 (IPIA), as amended by the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA) and the Improper 

Payments Elimination and Recovery Improvement Act of 2012 (IPERIA), 

requires executive branch agencies to annually estimate improper 

payments for programs they determine to be susceptible to significant 

improper payments, among other things.3

Although agencies report improper payment estimates annually, in our 

report on the Fiscal Year 2017 Financial Report of the U.S. Government

we continued to report a material weakness in internal control related to 

improper payments because the federal government is unable to 

 1

Under the Improper Payments Information Act of 2002, as amended, an improper 

payment is statutorily defined as any 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. It includes 

any payment to an ineligible recipient, any payment for an ineligible good or service, any 

duplicate payment, any payment for a good or service not received (except for such 

payments where authorized by law), and any payment that does not account for credit for 

applicable discounts. See 31 U.S.C. § 3321 Note. Office of Management and Budget 

guidance also provides that when an agency’s review is unable to discern whether a 

payment was proper as a result of insufficient or lack of documentation, this payment must 

also be considered an improper payment.

2

The almost $141 billion in estimated improper payments is attributable to 90 programs 

across 21 agencies, as reported in agencies’ financial reports. See app. I for more 

information on reported improper payment estimates by program. The Fiscal Year 2017 

Financial Report of the United States Government did not include a government-wide 

improper payment estimate or error rate. Since fiscal year 2003, a government-wide 

estimate and error rate had been reported in financial reports based on the programs and 

activities that reported estimates. OMB no longer reports a government-wide estimate or 

error rate because OMB analyzed program-by-program improper payment data and 

concluded that the improper payment rate at the programmatic level was more useful and 

transparent than aggregate improper payment data. Reported error rates (i.e., improper 

payment rates) reflect the estimated improper payments as a percentage of total program 

outlays.

3

IPIA, as amended, defines significant improper payments as gross annual improper 

payments that may have exceeded (1) both 1.5 percent of program outlays and 

$10 million or (2) $100 million (regardless of percentage of program outlays).

Letter
Page 2 GAO-18-377 Improper Payments

determine the full extent to which improper payments occur and 

reasonably assure that appropriate actions are taken to reduce them.4 In 

addition, some inspectors general have reported issues related to 

agencies’ improper payment estimates, including methodologies that may 

not produce reliable estimates.

Estimation of improper payments is key to understanding the extent of the 

problem and to developing effective corrective actions to address it. 

Relevant laws and guidance provide agencies flexibility in developing 

improper payment estimates, and agencies use a variety of processes to 

develop their improper payment estimates.

We prepared this report under the authority of the Comptroller General to 

conduct evaluations on his own initiative and support congressional 

oversight of issues of national importance.5 This report describes 

agencies’ processes to estimate improper payments in selected programs 

for fiscal year 2017 and the extent to which certain differences in these 

processes can affect the usefulness of the resulting estimates.

To select programs for review, we first identified those programs that 

reported improper payment estimates and had the largest program 

outlays for either fiscal year 2015 or 2016. This yielded a 

nongeneralizable sample of 11 programs at seven agencies. For these 

programs, we reviewed the processes to estimate improper payments for 

fiscal year 2017 (i.e., the improper payment estimates reported in 

agencies’ fiscal year 2017 agency financial reports). Although the 

Department of Agriculture’s (USDA) Supplemental Nutrition Assistance 

Program (SNAP) met the criteria to be included in our review (based on 

program outlays in fiscal year 2015 and reporting an improper payment 

estimate in fiscal year 2015), the agency ultimately did not report an 

improper payment estimate for the program in its fiscal year 2017 agency 

 4

GAO, Financial Audit: Fiscal Years 2017 and 2016 Consolidated Financial Statements of 

the U.S. Government, GAO-18-316R (Washington, D.C.: Feb. 15, 2018). For fiscal year 

2017, some agencies did not report improper payment estimates for certain risksusceptible programs, including the Department of Housing and Urban Development’s 

Rental Housing Assistance programs, the Department of Health and Human Services’ 

Advance Premium Tax Credit, and the Department of the Treasury’s Premium Tax Credit, 

each of which have reported program outlays over $25 billion. 

5

31 U.S.C. § 717(b).
Page 3 GAO-18-377 Improper Payments

financial report (AFR).6 According to its fiscal year 2017 AFR, the statereported data for SNAP did not allow for a determination of state error 

rates, which have been used in prior years to calculate a national SNAP 

improper payment estimate. Therefore, we did not include SNAP in our 

review of improper payment estimation methodologies. Consequently, we 

reviewed the 10 programs at six agencies listed in table 1. Collectively, 

reported program outlays for these programs totaled over $2.5 trillion for 

fiscal year 2017.

 6

USDA reported an improper payment estimate of $2.6 billion and program outlays of $70 

billion in its fiscal year 2015 AFR, the most recent year for which an estimate was 

reported.
Page 4 GAO-18-377 Improper Payments

Table 1: List of 10 Programs GAO Reviewed for Improper Payment Estimation Methodologies

Agency Program

Office of 

Management and 

Budget highpriority program?

Per fiscal year 2017 agency financial report

Program outlays 

(dollars in millions)

Improper 

payment estimate 

(dollars in millions)

Department 

of Defense 

Defense Finance and 

Accounting Service 

Commercial Pay

No 259,165.2 0.9

Military Pay No 96,777.3 182.5

Department of 

Education 

Direct Loan Yes 95,389.3 3,863.3

Department of 

Health and Human 

Services 

Medicare Fee-forServiceYes 380,762.0 36,208.0

Medicare Advantage 

(Part C)

Yes 172,768.1 14,351.7

Medicare Prescription 

Drug (Part D)

Yes 77,450.3 1,295.6

Medicaid Yes 363,839.4 36,731.1

Department of the 

Treasury 

Earned Income 

Tax Credit 

Yes 67,992.5 16,231.6

Office of Personnel 

Management 

Retirement No 82,913.0 313.8

Social Security 

Administration 

Old-Age, Survivors, and 

Disability Insurance 

Yes 911,200.3 2,578.4

Total 2,508,257.4 111,756.9

Source: GAO analysis of agencies’ improper payment estimates for fiscal years 2015 through 2017. | GAO-18-377

Note: According to the Office of Management and Budget’s paymentaccuracy.gov, high-priority 

programs are those programs that either (1) report $750 million or more in improper payments in a 

given year, (2) did not report an improper payment estimate in the current reporting year but 

previously reported an improper payment estimate over the threshold, or (3) have not yet established 

a program error rate and have measured components that were above the threshold. Reported error 

rates (i.e., improper payment rates) reflect the estimated improper payments as a percentage of total 

program outlays.

To address our objective, we reviewed agencies’ policies and procedures 

for estimating improper payments for these 10 programs, as well as the 

information reported in agencies’ fiscal years 2016 and 2017 AFRs 

regarding improper payments and their reported root causes. Further, we 

interviewed relevant agency officials to obtain additional information about 

the processes agencies use to estimate improper payments, as well as 

Office of Management and Budget (OMB) staff to understand OMB’s role 

in providing guidance and oversight to the agencies. We analyzed 
Page 5 GAO-18-377 Improper Payments

similarities and differences between agencies’ processes and also 

reviewed relevant laws, guidance, and internal control standards.7 We 

focused our review on gaining an understanding of the processes 

agencies use to estimate improper payments, and not on evaluating 

whether these processes were properly designed or the extent to which 

they were properly implemented.

We conducted this performance audit from November 2016 to May 2018 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Executive branch agencies are required to take various steps regarding 

improper payments under IPIA, as amended by IPERA and IPERIA, and 

related OMB guidance. The steps include the following:

1. reviewing all programs and activities and identifying those that may be 

susceptible to significant improper payments (commonly referred to as 

a risk assessment),

2. developing improper payment estimates for those programs and 

activities that the agency identified as being susceptible to significant 

improper payments,

3. analyzing the root causes of improper payments and developing 

corrective actions to reduce them for those programs and activities 

that the agency identified as being susceptible to significant improper 

payments, and

4. reporting on the results of addressing the foregoing requirements.

Figure 1 lays out these steps, as well as the major components of 

developing an improper payment estimate. IPERA also directs executive 

branch agencies’ inspectors general to annually determine and report on 

 7

GAO, Standards for Internal Control in the Federal Government, GAO-14-704G 

(Washington, D.C.: September 2014).

Background

Estimation of Improper 

Payments
Page 6 GAO-18-377 Improper Payments

whether their respective agencies complied with six criteria listed in the 

law.8

Figure 1: Key Steps Related to Analyzing Improper Payments and Major Components in Developing an Improper Payment 

Estimate

Note: According to the Office of Management and Budget’s paymentaccuracy.gov, high-priority 

programs are those programs that either (1) report $750 million or more in improper payments in a 

given year, (2) did not report an improper payment estimate in the current reporting year but 

previously reported an improper payment estimate over the threshold, or (3) have not yet established 

a program error rate and have measured components that were above the threshold. Reported error 

rates (i.e., improper payment rates) reflect the estimated improper payments as a percentage of total 

program outlays.

On an annual basis, agencies are required to develop improper payment 

estimates for programs that they consider susceptible to significant 

improper payments. This generally involves selecting a sample of 

program payments (or other items, such as invoices) and reviewing them 

 8

See GAO, Improper Payments: Additional Guidance Could Provide More Consistent 

Compliance Determinations and Reporting by Inspectors General, GAO-17-484 

(Washington, D.C.: May 31, 2017). Among other things, the compliance criteria listed in 

IPERA include reporting improper payment estimates for all programs and activities 

deemed susceptible to significant improper payments, publishing and meeting reduction 

targets for these programs, and reporting an improper payment rate of less than 10 

percent for these programs and activities.
Page 7 GAO-18-377 Improper Payments

in order to determine whether the relevant payments were proper. OMB 

guidance for developing improper payment estimates focuses on the 

statistical nature of the estimates and provides agencies with flexibility in 

developing their estimates. IPIA, as amended, provides the definition of 

“improper payment” with IPERIA further instructing OMB to issue 

guidance requiring agencies to include in the estimate all improper 

payments, regardless of whether those payments have been or are being 

recovered. OMB incorporated this requirement into Appendix C to 

Circular No. A-123, Requirements for Effective Estimation and 

Remediation of Improper Payments. In accordance with these relevant 

laws and OMB guidance, agencies must apply “improper payment” in the 

context of their programs when developing improper payment estimates.

The 10 programs we reviewed serve a variety of purposes and are 

administered by various agencies across the federal government. Table 2 

summarizes each of these programs.

Characteristics of 

Programs Reviewed
Page 8 GAO-18-377 Improper Payments

Table 2: Summary of the 10 Programs That GAO Reviewed 

Agency Program Program description

Department 

of Defense 

Defense Finance and 

Accounting Service 

Commercial Pay

Pays vendors and contractors for goods and services

Military Pay Pays active and reserve/guard servicemembers’ salary, benefits, and 

other compensation

Department 

of Education 

Direct Loan Makes loans through participating schools to eligible undergraduate 

students and their parents, as well as graduate students

Department of 

Health and Human 

Services 

Medicare Fee-forService Provides health insurance for people age 65 or older, people younger 

than age 65 with certain disabilities, and people of all ages with endstage renal disease

Medicare Advantage 

(Part C)

Provides health insurance that allows beneficiaries to receive Medicare 

benefits through a private health plan

Medicare Prescription 

Drug (Part D)

Provides an outpatient prescription drug benefit to Medicare beneficiaries

Medicaid Provides health insurance—administered jointly by the federal 

government and states—to qualifying low-income individuals

Department of 

the Treasury 

Earned Income 

Tax Credit 

Provides a refundable federal tax credit that offsets income taxes owed 

by low-income workers who qualify and provides a refund if the credit 

exceeds the amount of taxes owed

Office of Personnel 

Management 

Retirement Pays retirement benefits to retirees, survivors, representative payees, 

and families under the Civil Service Retirement System and the Federal 

Employees Retirement System

Social Security 

Administration 

Old-Age, Survivors, and 

Disability Insurance 

Provides retirement and survivors benefits to qualified workers and their 

family members, and provides benefits for workers who become disabled 

and their families

Source: GAO summary of agency financial reports and prior GAO reports. | GAO-18-377
Page 9 GAO-18-377 Improper Payments

IPIA, as amended, requires agencies to develop statistically valid 

improper payment estimates or estimates that are otherwise appropriate 

using a methodology approved by the Director of OMB.9 The six agencies 

we reviewed reported using either statistically valid or alternative 

sampling approaches for the 10 selected programs, and some agencies 

reported additionally incorporating actual improper payment amounts into 

their estimates, as shown in table 3.

 9

According to OMB guidance, an agency using a statistically valid approach should yield 

an estimate of improper payments with a (1) 90 percent confidence interval of plus or 

minus 2.5 percent of the total amount of all payments for the program around the estimate 

of dollars of improper payments or (2) 95 percent confidence interval of plus or minus 3 

percent around the estimate of the dollar amount of improper payments.

Agency Processes to 

Estimate Improper 

Payments Varied, and 

Some Differences 

May Hinder the 

Usefulness of the 

Resulting Estimates

Aspects of Sample 

Selection, Including 

Sampling Approach and 

Age of Data, Varied

Sampling Approach
Page 10 GAO-18-377 Improper Payments

Table 3: Improper Payment Sampling Approaches Used by Six Selected Agencies for 10 Programs That GAO Reviewed

Agency Program Statistical Alternative

Department of Defense Defense Finance and Accounting 

Service Commercial Pay  —

Military Pay a —

Department of Education Direct Loan — 

Department of Health and 

Human Services

Medicare Fee-for-Service  —

Medicare Advantage (Part C)  —

Medicare Prescription Drug (Part D)  —

Medicaid — b

Department of the Treasury Earned Income Tax Credit  —

Office of Personnel 

Management

Retirement a —

Social Security 

Administration

Old-Age, Survivors, and 

Disability Insurance 

 —

Source: GAO analysis of agency documentation and interviews with agency officials. | GAO-18-377

a

In addition to the statistical sampling approach, actual improper payment amounts were also 

incorporated into the estimate for this program.

b

Medicaid’s sampling approach is considered alternative because it reviews states on a three-year 

cycle, instead of reviewing all states every year. However, the sampling of each state’s Medicaid 

payments is done using a statistical approach. 

If an agency is unable to produce a statistically valid improper payment 

estimate, it can use an alternative approach if approved by OMB. For 

example, the Department of Education (Education) reported using an 

alternative methodology for the Direct Loan program after conducting a 

cost-benefit analysis comparing use of a statistical and an alternative 

methodology. Similarly, the Department of Health and Human Services 

(HHS) reported using an alternative methodology for Medicaid to better 

manage resources needed to conduct the required reviews.

In addition to their statistical approaches, two agencies reported 

incorporating actual improper payment amounts into the estimates for 2 of 

the programs we reviewed. Officials at the Department of Defense (DOD) 

stated that the agency calculates its Military Pay improper payment 

estimate by adding the amount of debts due to DOD entered into its 

financial system based on overpayments (i.e., debts due to DOD by a 

recipient of an overpayment) identified during the fiscal year to a 

projected estimate of improper payments. Officials at the Office of 

Personnel Management (OPM) stated that the agency calculates its 

Retirement program improper payment estimate by adding the amount of 

debts due to OPM entered into its financial system based on 
Page 11 GAO-18-377 Improper Payments

overpayments (i.e., debts due to OPM by a recipient of an overpayment) 

identified during the fiscal year to a projected estimate of 

underpayments.10

To implement their sampling approaches, agencies select a sample of 

data to test from a larger, specified population of data. For the six 

agencies we reviewed, data sampled varied by program and include 

payments, claims, tax returns, and pay accounts. For example, according 

to their policies and procedures

• DOD samples invoices related to payments made from 12 financial

systems for Defense Finance and Accounting Service Commercial 

Pay,

• HHS samples medical claims for Medicare Fee-for-Service, and

• DOD samples pay accounts for Military Pay.

Agencies subject specific data populations to sampling, which may not 

include all payments made for a program. Reasons for sampling 

exclusions varied across programs, as shown by the examples in table 4.

 10As noted later in this report, OPM does not develop a statistical estimate of 

overpayments in its Retirement program.

Data Subject to Sampling
Page 12 GAO-18-377 Improper Payments

Table 4: Examples of Population Subsets Excluded from Improper Payment Sampling at Selected Agencies

Agency Program Type of payment not included Agency rationale 

Department of 

Defense

Defense Finance 

and Accounting 

Service (DFAS) 

Commercial Pay

Classified payments DFAS is not authorized to access data and 

supporting documentation to review classified 

payments

Department of 

Health and Human 

Services

Medicare Feefor-ServicePayments not made from the 

Medicare Trust Fund

These may include services processed under 

an agreement with the Department of Veterans 

Affairs or services paid for by a primary 

insurer.

Medicare Advantage 

(Part C)

Payments to beneficiaries who 

switched contracts during the data 

collection year

The sampling methodology is designed to 

measure error in risk adjusted payments to 

continuously enrolled beneficiaries only. 

Medicaid State-only payments The improper payment reviews focus on 

federal improper payments. Some Medicaid 

payments, known as state-only payments, are 

not matched with federal funds.

Administrative payments The improper payment reviews focus on claims 

and payments representing services rendered 

to individual beneficiaries or payments made 

on behalf of individual beneficiaries.

Department of 

the Treasury

Earned Income 

Tax Credit

Returns with a Puerto Rico or 

international filing location

Overseas taxpayer returns are excluded 

because of the practical limitations of auditing 

these returns.

Source: GAO analysis of agency documentation and interviews of agency officials. | GAO-18-377

Some of the selected agencies reported sampling multiple sets of data. 

For example, for its Direct Loan improper payment estimate, Education 

officials stated that the agency reviews Program Review Reports to 

identify improper payments in originations and also samples loan 

consolidation and refund payments. According to agency officials, Direct 

Loan origination, consolidation, and refund transactions carry different 

risks of improper payment.

To estimate improper payments for fiscal year 2017, the six agencies we 

reviewed reported sampling and testing data that varied in age from 

calendar year 2013 to fiscal year 2017. Figure 2 shows the range of data 

used.

Age of Data
Page 13 GAO-18-377 Improper Payments

Figure 2: Range of Data Used by Six Agencies to Develop Improper Payment Estimates Reported in Fiscal Year 2017 Agency 

Financial Reports for Selected Programs 

OMB guidance states that to the extent possible, data used for estimating 

improper payments should coincide with the fiscal year being reported, 

but agencies may use a different 12-month reporting period with approval 

from OMB. OMB staff acknowledged there are costs and benefits to 

sampling newer or older data. OMB staff stated that although they review 
Page 14 GAO-18-377 Improper Payments

agencies’ sampling and estimation plans, they defer to the agencies 

regarding the appropriateness of the age of data used to estimate 

improper payments. OMB staff stated that they approve the timeframe of 

the data used in alternative methodologies as part of the approval of the 

methodology overall, whereas OMB silence provides tacit approval (i.e., 

no communication to the agency) for statistically valid methodologies.

After agencies determine what subsets of data and types of transactions 

to review, they generally test the data and calculate their improper 

payment estimates. Testing processes varied among the 10 programs, 

with some of the six agencies using processes designed specifically to 

estimate improper payments and others leveraging existing processes 

designed for other purposes.

Some of the selected agencies reported using multiple testing processes 

and combining the results to develop a program’s improper payment 

estimate. For example, according to their policies and procedures

• the Direct Loan estimate comprises three component estimates for 

loan originations, consolidations, and refunds and

• the Medicaid estimate includes fee-for-service, managed care, and 

eligibility components.

Table 5 summarizes the processes used by the six agencies we 

reviewed.

Processes for Identifying 

Improper Payments Varied 

by Program, Including 

Consideration of Eligibility 

and Treatment of 

Nonresponses

Testing Processes
Page 15 GAO-18-377 Improper Payments

Table 5: Testing Processes Used to Estimate Improper Payments at Six Selected Agencies

Programs that leverage existing quality assurance or other processes

Agency Program Existing process Objective of existing process

Department of 

Education

Direct Loan 

(originations)

Federal Student Aid (FSA) 

program reviews

FSA routinely conducts program reviews to 

confirm that a school meets FSA 

requirements for institutional eligibility, 

financial responsibility, and administrative 

capability. 

Department of the 

Treasury

Earned Income 

Tax Credit

National Research 

Program (NRP)

The role of NRP is to collect data on reporting 

compliance that supports strategic decisions 

about the placement and type of resources 

necessary to effectively address the needs of 

taxpayers. 

Office of Personnel 

Management

Retirement Quality Assurance 

reviews

Quality Assurance staff select monthly 

samples of new annuities to verify their 

accuracy for quality assurance purposes. 

Social Security 

Administration

Old-Age, Survivors, 

and Disability Insurance 

(OASDI)

Stewardship 

reviews

The Office of Quality Review performs 

Stewardship Reviews to examine the 

nonmedical elements of OASDI programs 

relating to payment accuracy and entitlement 

as well as eligibility for benefit payments 

made during a sample period on a selected 

Social Security number. 

Programs that use processes designed specifically to estimate improper payments

Agency Program

Department of 

Defense

Defense Finance and Accounting Service Commercial Pay

Military Pay

Department of 

Education

Direct Loan (refunds)

Direct Loan (consolidations) 

Department of 

Health and Human 

Services

Medicare Fee-for-Service

Medicare Advantage (Part C)

Medicare Prescription Drug (Part D)

Medicaid

Source: GAO analysis of agency documentation and interviews of agency officials. | GAO-18-377
Page 16 GAO-18-377 Improper Payments

Although agencies’ testing processes varied, most included steps to 

address aspects of eligibility of beneficiaries, goods, or services—a key 

component of determining the appropriateness of a payment—in their 

programs.11 For example, according to their policies and procedures

• for Medicare Fee-for-Service, reviewers examine the medical 

necessity, compliance with documentation requirements, and coding 

of services provided, among other things;

• for the Earned Income Tax Credit (EITC), auditors examine whether 

the taxpayer properly reported income and whether the taxpayer 

meets eligibility criteria, including income and qualifying child 

requirements, and auditors examine, among other things, whether the 

taxpayer is subject to a disallowance period on receiving EITC;

• for Medicaid, reviewers examine fee-for-service claims and managed 

care payments to determine the eligibility status of the beneficiary and 

the provider, as well as support for the medical necessity of fee-forservice claims, among other things;

• for Old-Age, Survivors, and Disability Insurance (OASDI), reviewers 

examine factors to support the beneficiary’s eligibility, including, 

among other things, citizenship, relationship (in the case of survivor 

benefits), and receipt of other government benefits; and

• although Education’s Direct Loan program reviews can vary in scope, 

they may include, among other things, steps to verify educational 

institution eligibility (such as licensing and accreditation) and student 

eligibility (such as enrollment status and satisfactory academic 

progress).

In contrast, per their policies and procedures, eligibility is not tested for 

DOD’s Military Pay or the overpayment component of OPM’s Retirement 

estimate.

DOD Military Pay. DOD reported using the results of monthly payment 

reviews to calculate a projected improper payment amount for Military 

Pay. However, DOD’s policies and procedures do not require a review of 

servicemember eligibility for special pay or allowances as part of these 

monthly reviews. DOD’s Standard Operating Procedures (SOP) direct 

 11We did not conduct a comprehensive review of agencies’ testing processes to ensure 

that they review all aspects of program eligibility when estimating improper payments. As 

such, there may be elements of eligibility related to these programs that are not tested in 

these processes. Further, we did not evaluate implementation of these processes.
Page 17 GAO-18-377 Improper Payments

reviewers to recalculate payments to servicemembers solely based on 

the pay account data included in DOD systems (i.e., to verify that 

components of servicemember pay were calculated appropriately).

DOD’s SOP does not direct reviewers to verify that servicemembers were 

eligible for special pay or allowances by verifying the information included 

in the pay account (such as pay grade) with supporting documentation. 

According to DOD officials, reviewers may investigate potential 

inconsistencies in pay account data identified during their reviews—which 

may include eligibility issues—but this process is not consistently 

performed or documented. According to DOD officials, an example of a 

potential inconsistency is when a servicemember receives jump pay (a 

hazard pay for parachute jumps) but is located at a site where no jump 

activity occurred.

According to DOD officials, to help compensate for the limitations of its 

monthly reviews, DOD calculates the final reported Military Pay improper 

payment estimate by adding actual debts due to DOD (related to 

overpayments) identified during the year to the projected estimate of the 

monthly reviews. DOD identifies the actual overpayments through various 

methods, including other postpayment reviews and servicemember selfreporting. 

Standards for Internal Control in the Federal Government states that 

management should identify, analyze, and respond to risks related to 

achieving the defined objectives.12 DOD has acknowledged internal 

control deficiencies related to the Military Pay program, which—if 

addressed in improper payment testing—could have an impact on the 

program’s improper payment rate.13 However, these deficiencies were 

identified through other internal control reviews not related to estimating 

improper payments. For the purposes of estimating improper payments, 

DOD has not fully assessed the risks in its Military Pay program and 

evaluated whether its approach for estimating improper payments 

effectively addresses these risks. As a result, DOD’s process for 

estimating Military Pay improper payments may not reflect significant 

 12GAO-14-704G.

13In its 2017 agency financial report, DOD management identified multiple material 

weaknesses in internal control over financial reporting related to Military Pay. These 

include ineffective processes and controls to record military pay transactions and 

personnel actions in a timely, complete, and accurate manner, as well as unreliable and 

missing supporting documentation for personnel actions. 
Page 18 GAO-18-377 Improper Payments

risks of improper payment in the program, specifically whether 

servicemembers are eligible for the special pay or allowances they 

receive, calling into question the improper payment estimate and its 

usefulness for developing effective corrective actions.

OPM Retirement. OPM relies on its existing Quality Assurance (QA) 

process to estimate Retirement underpayments. The QA process is 

designed to determine whether new Retirement claims (i.e., claims paid 

for the first time) have been adjudicated correctly. Therefore, only new 

Retirement claims are sampled and tested for accuracy. OPM applies 

historical results of QA testing to older claims; however, these historical 

results do not reflect any different risks of underpayment that the older 

claims may face.14

Although OPM’s QA process also produces an estimate of overpayments, 

the agency’s policies and procedures instead use actual debts due to 

OPM (related to overpayments) that were identified during the fiscal year 

as its overpayment amount (i.e., the overpayment amount does not reflect 

any testing of Retirement payments to verify eligibility or accuracy). These 

actual overpayments represent amounts that have been identified through 

various means, such as inspector general fraud referrals. OPM officials 

stated that the agency uses actual amounts because the QA estimate 

may overstate overpayments. However, the fiscal year 2016 QA 

overpayment estimate was lower than the actual amount of debts 

identified as due to OPM.

Standards for Internal Control in the Federal Government states that 

management should identify, analyze, and respond to risks related to 

achieving the defined objectives.15 OPM has not fully assessed the risks 

of improper payments in its Retirement program—particularly related to 

the risk of underpayments in older claims and the risk of overpayments—

and evaluated whether its approach for estimating improper payments 

effectively addresses these risks. As a result, OPM’s processes for 

estimating Retirement improper payments may not reflect significant risks 

of improper payment in the program, calling into question the improper 

payment estimate and its usefulness for developing effective corrective 

actions.

 14These risks may include life events—such as divorce from or the death of a spouse for 

which the retiree elected a survivor benefit—that may increase the retiree’s annuity.

15GAO-14-704G.
Page 19 GAO-18-377 Improper Payments

OMB guidance. OMB issues guidance for agencies to implement various 

requirements of the improper payment laws. Specifically, OMB is required 

by IPERIA to issue guidance to set standards for agencies to follow in 

determining the underlying validity of sampled payments to ensure that 

amounts being billed, paid, or obligated for payment are proper. Although 

existing OMB guidance addresses requirements for sampling, it does not 

address how agencies test to identify improper payments, such as using 

a risk-based approach to help ensure that key risks of improper 

payments, like eligibility, are addressed through testing processes. 

Without such guidance, there is increased risk that agencies’ processes 

may not address key risks of improper payments in their programs—for 

example, the cases of DOD Military Pay and OPM Retirement described 

above—calling into question the improper payment estimates for such 

programs and their usefulness for developing effective corrective actions.

According to OMB guidance, when an agency’s review is unable to 

determine whether a payment was proper because of insufficient or lack 

of documentation, the payment must be considered an improper 

payment. Among the six agencies and 10 programs we reviewed, 

treatment of insufficient documentation varied by program, as did the 

classification of these issues for root cause reporting in the AFRs.16

HHS’s programs were the only ones we reviewed that reported improper 

payments in the insufficient documentation root cause category for fiscal 

years 2016 or 2017, as shown in table 6.

 16OMB guidance requires agencies to report the root causes of their improper payments 

using specific categories, including a category for cases in which there was insufficient 

documentation to determine whether the payment was proper.

Treatment of Insufficient 

Documentation
Page 20 GAO-18-377 Improper Payments

Table 6: The Department of Health and Human Services Reported Improper 

Payments Related to Insufficient Documentation in Fiscal Years 2016 and 2017 for 

Four Programs GAO Reviewed

Program

Reported improper payments 

related to insufficient documentation

Fiscal year 2016 

(dollars in billions)

Fiscal year 2017 

(dollars in billions)

Medicare Fee-forService27.3 23.8

Medicare Part C 11.5 9.3

Medicare Part D 1.7 0.5

Medicaid 2.4 3.2

Source: GAO analysis of agency financial reports for fiscal years 2016 and 2017. | GAO-18-377

Some agencies stated that they report insufficient documentation in other 

root cause categories that they consider more appropriate. For example, 

Education officials stated that for the Direct Loan program, payments that 

lack sufficient supporting documentation may be placed in the 

“Administrative or Process Error Made by Other Party” root cause 

category. In these cases, a third party—such as a loan servicer—is 

unable to provide sufficient documentation supporting that the sampled 

payment was proper. OMB guidance states that in cases where the 

agency believes that more than one root cause category might be 

suitable, the agency should determine which category it believes to be the 

most appropriate.

Additionally, some agencies stated that the “insufficient documentation”

category was not always relevant when they recreated sampled cases to 

estimate a program’s improper payments. For example, according to 

officials, to complete an OASDI stewardship review of a sampled case, a 

Social Security Administration (SSA) quality reviewer reviews the 

documentation related to the original determination and then 

independently re-develops all factors of the payment and interviews the 

associated beneficiary. According to agency officials, insufficient 

documentation would not apply as all improper payments identified in the 

stewardship sample are supported by documentation and payment has 

been verified in all reviewed cases.

As noted previously, the processes for estimating DOD Military Pay and 

OPM Retirement improper payments were limited, and these limitations 

may have an impact on the agencies’ ability to identify improper 

payments related to insufficient documentation.
Page 21 GAO-18-377 Improper Payments

Treatment of cases of nonresponse. Some agencies contact outside 

entities—such as payees or beneficiaries—as part of their improper 

payment testing processes. Among the six agencies we reviewed, 

treatment of cases of nonresponse differed.17 For example:

• SSA officials stated that in cases where quality reviewers do not 

receive responses from OASDI beneficiaries they contact, they 

exclude the cases from review (unless the reviewer identifies an 

improper payment in the initial review that is completed prior to 

reaching out to the beneficiary).18

• For EITC improper payment estimation purposes, the Internal 

Revenue Service (IRS) stated that the agency does not consider the 

sampled payment associated with a nonresponse case to be proper 

or improper. It sets the sampling weight of nonresponse cases to zero 

and adjusts the sampling weights of respondents upward to account 

for the nonresponse cases.19 IRS’s methodology assumes 

nonresponse and response cases have an equal likelihood of 

improper payment.

• For Medicare Fee-for-Service and Medicaid, HHS’s policies and 

procedures consider payments associated with nonresponse cases to 

be improper.

OMB guidance states that when an agency’s review is unable to discern 

whether a payment was proper as a result of insufficient or lack of 

documentation, this payment must be considered an improper payment. 

However, it does not specifically address the appropriate treatment of 

nonresponse cases for improper payment estimation purposes. As a 

result, without clearer guidance there is increased risk that agencies’

improper payment estimates may be understated and that estimates for 

similar programs may not be comparable.

 17Some agencies take multiple steps to contact such entities and collect the necessary 

information before classifying a situation as a nonresponse case.

18According to SSA, quality reviewers make all reasonable efforts to locate each 

beneficiary in a sampled case. The quality reviewers thoroughly exhaust all sources 

identified in SSA’s records, as well as third party sources, prior to excluding a case from 

review. If the quality reviewer cannot locate the beneficiary, the case is referred to the 

servicing field office for further contact and development.

19IRS’s treatment of nonresponse cases differs for operational purposes in that these 

EITC claims are disallowed and IRS attempts to recover related overpayments.
Page 22 GAO-18-377 Improper Payments

When agencies identify improper payments, they must determine the 

amount of the payment that was improperly made. The six agencies we 

reviewed generally reported using the definition of improper payment in 

relevant laws and OMB guidance to determine the amount of improper 

payments identified. OMB guidance provides agencies with instructions 

on how to calculate the amount of improper payments.

However, when developing its improper payment estimate for EITC, IRS 

subtracted overpayments that were paid out and later recovered.20 By 

subtracting recovered overpayments, IRS excluded them from the EITC 

improper payment estimate. For 2013—the tax year used to produce the 

fiscal year 2017 improper payment estimate—IRS estimated that 

$1.2 billion in EITC overpayments would be recovered.

IPERIA directed OMB to provide guidance that requires agencies to 

include all improper payments in their improper payment estimates, 

regardless of whether they have been or are being recovered. Although 

the OMB guidance was revised in October 2014 to implement this 

requirement, IRS has not updated its estimation methodology for EITC. 

By not updating its guidance and continuing to remove EITC 

overpayments that may be subsequently recovered, IRS is understating 

its improper payment estimate and potentially limits its ability to address 

these types of improper payments before they occur.

Improper payments are a long-standing, significant problem in the federal 

government. Estimation of improper payments is key to understanding the 

extent of the problem and to developing effective corrective actions to 

 20IRS—a bureau of the Department of the Treasury—conducts the National Research 

Program, the results of which are used to estimate EITC improper payments. The 

Department of the Treasury reports the EITC improper payment estimate in its AFR.

Except for IRS, Selected 

Agencies Generally 

Reported Using Law and 

OMB Guidance to 

Calculate Improper 

Payment Estimates

Calculation of Improper 

Payment Estimates

Conclusions
Page 23 GAO-18-377 Improper Payments

address it. Among the six agencies we reviewed, processes to estimate 

improper payments in their programs varied, and certain differences in 

these processes may affect the quality of the resulting estimates and 

consequently these agencies’ efforts to reduce improper payments. 

Specifically, policies and procedures for DOD’s Military Pay and OPM’s 

Retirement programs’ improper payment estimation methodologies do not 

address certain key risks, like eligibility, in part because these agencies 

have not fully assessed their processes. Further, although OMB guidance 

addresses requirements for sampling, it does not address how agencies 

test to identify improper payments. Without such assessments and 

guidance, there is increased risk that agencies’ processes may not 

address key risks of improper payments in their programs, calling into 

question the improper payment estimates for such programs and their 

usefulness for developing effective corrective actions.

Additionally, for agencies we reviewed that contact outside entities as part 

of their improper payment estimation processes, the treatment of cases of 

nonresponse varied. OMB guidance does not specifically address the 

appropriate treatment of nonresponse cases for improper payment 

estimation purposes. Without clearer guidance there is increased risk that 

agencies’ improper payment estimates may be understated and that 

estimates for similar programs may not be comparable.

Finally, although IPERIA directed OMB to provide guidance that requires 

agencies to include all improper payments in their improper payment 

estimates, regardless of whether they have been or are being recovered, 

IRS has not updated its processes to reflect the change. By not updating 

its guidance and continuing to remove EITC overpayments that may be 

subsequently recovered, IRS is understating its improper payment 

estimate and potentially limits its ability to address these types of 

improper payments before they occur.

We are making two recommendations to the Director of OMB that have 

government-wide implications and specific recommendations to DOD, 

OPM, and IRS regarding their programs included in this review.

The Director of OMB should develop guidance on how agencies test to 

identify improper payments, such as using a risk-based approach to help 

ensure that key risks of improper payments, such as eligibility, are 

addressed through testing processes. (Recommendation 1)

Recommendations for 

Executive Action
Page 24 GAO-18-377 Improper Payments

The Director of OMB should develop guidance clarifying the appropriate 

treatment of nonresponse cases during improper payment testing. 

(Recommendation 2)

The Under Secretary of Defense (Comptroller) should assess the 

processes for estimating Military Pay improper payments to determine 

whether they effectively address key risks of improper payments—

including eligibility for different types of pay and allowances—and take 

steps to update the processes to incorporate key risks that are not 

currently addressed. (Recommendation 3)

The Director of OPM should assess the processes to estimate Retirement 

improper payments to determine whether they effectively address key 

risks of improper payments—including eligibility and whether older claims 

face different risks of improper payments than new claims—and take 

steps to update the processes to incorporate key risks that are not 

currently addressed. (Recommendation 4)

The Commissioner of IRS should update IRS’s improper payment 

estimation methodology to not exclude recovered overpayments from its 

EITC improper payment estimate. (Recommendation 5)

We provided a draft of this report for comment to OMB, DOD, Education, 

HHS, Treasury, OPM, SSA, and USDA. OMB provided oral comments, 

which are summarized below. OPM, DOD, and IRS provided written 

comments, which are reproduced in appendixes II through IV, 

respectively. Education, HHS, SSA, and USDA did not provide written 

comments on the draft report. In addition, HHS, IRS, OMB, OPM, and 

SSA provided technical comments, which we have incorporated, as 

appropriate.

In oral comments provided on April 30, 2018, a Senior Policy Advisor in 

OMB’s Office of Federal Financial Management stated that OMB partially

agreed with our first recommendation and agreed with our second 

recommendation. 

• Regarding the first recommendation, the Senior Policy Advisor stated 

that OMB should not have to develop more specific guidance as each 

program and activity has its own risks. Instead, inspectors general are

better equipped and positioned to review the sampling and estimation 

plans as part of their annual IPERA compliance audits and that 

agencies, their statisticians, and inspectors general should work out 

Agency Comments

and Our Evaluation
Page 25 GAO-18-377 Improper Payments

the best testing procedures for their agencies. OMB could provide 

suggestions during OMB’s annual town hall meeting related to 

improper payments for areas that inspectors general may consider. 

Although we agree that programs and activities may face different 

risks of improper payment, we continue to believe that guidance from 

OMB on how agencies test to identify improper payments—such as 

directing agencies to take a risk-based approach in developing their 

testing procedures—could help ensure that agencies address the 

specific risks they identify when developing improper payment 

estimates. Further, such guidance could also help ensure that testing 

processes are designed to address an agency’s identified risks before 

the estimate is developed, whereas an inspector general’s review—as 

well as related recommendations for improvement—would generally 

occur after the agency’s improper payment estimate had been 

developed and reported. 

• Regarding the second recommendation, the Senior Policy Advisor 

noted that OMB plans to update its guidance to direct agencies to 

treat nonresponse cases as improper payments and to include a new 

category for tracking such cases. 

In its written comments, OPM partially concurred with our 

recommendation to assess the processes to estimate Retirement 

improper payments to determine whether they effectively address the key 

risks of improper payments. OPM agreed to conduct an audit of older 

claims to determine if they face different risks than new claims. However, 

OPM did not agree with the part of the recommendation to assess the risk 

of improper payments related to eligibility in the estimation process. OPM

stated that eligibility is determined before annuity or survivor benefits are 

fully adjudicated. However, the objective of an improper payment 

estimate is to determine whether payments were made properly. To do 

so, an agency should determine whether the payee was eligible for the 

payment that was made, among other things. As such, we continue to 

believe that the recommendation—including the assessment of the risk of 

improper payments related to eligibility—is warranted.

In their written comments, DOD and IRS both agreed with our 

recommendations directed to them and described the steps they plan to 

take to implement them.
Page 26 GAO-18-377 Improper Payments

We are sending copies of this report to the appropriate congressional 

committees; the Secretaries of Agriculture, Defense, Education, Health 

and Human Services, and the Treasury; the Director of the Office of 

Personnel Management; the Administrator of the Social Security 

Administration; the Director of the Office of Management and Budget; and 

other interested parties. In addition, the report is available at no charge on 

the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix V.

Beryl H. Davis

Director

Financial Management and Assurance
Page 27 GAO-18-377 Improper Payments

List of Addressees

The Honorable Trey Gowdy

Chairman

Committee on Oversight and Government Reform

House of Representatives

The Honorable Mark Meadows

Chairman

Subcommittee on Government Operations

Committee on Oversight and Government Reform

House of Representatives

The Honorable Gary J. Palmer

Chairman

Subcommittee on Intergovernmental Affairs

Committee on Oversight and Government Reform

House of Representatives
Appendix I: Reported Improper Payment 

Estimates by Agency and Program for Fiscal 

Year 2017

Page 28 GAO-18-377 Improper Payments

Table 7 lists the fiscal year 2017 improper payment estimates by agency 

and program, as reported by agencies in their fiscal year 2017 agency 

financial reports and compiled on the Office of Management and Budget’s 

payment integrity website, paymentaccuracy.gov.

Table 7: Reported Improper Payment Estimates by Agency and Program for Fiscal Year 2017

Agency/program

Reported for fiscal year 2017

Program outlays 

(millions of dollars)

Improper 

payment estimate 

(millions of dollars)

Improper

payment rate

(percentage)

Broadcasting Board of Governors 218.4 0.4 —

Domestic Payroll 218.4 0.4 0.2

Corporation for National and Community Service 404.5 49.5 —

AmeriCorps 247.2 26.8 10.8

Foster Grandparents Program 82.5 14.1 17.1

Retired and Senior Volunteer Program 41.1 3.0 7.4

Senior Companion Program 33.8 5.7 16.8

Department of Agriculture 33,499.9 3,270.2 —

National School Lunch Program 12,258.1 1,875.5 15.3

School Breakfast Program 4,212.6 958.4 22.8

Special Supplemental Nutrition Program for Women, 

Infants, and Children

3,949.4 197.1 5.0

Child and Adult Care Food Program – Family Day 

Care Homes – Tiering Decisions

844.6 4.6 0.5

Loan Deficiency Payments 171.7 2.9 1.7

Livestock Forage Disaster Program 457.3 14.3 3.1

Noninsured Crop Disaster Assistance Program 139.6 11.9 8.5

Farm Security and Rural Investment Act Programs 2,304.3 25.8 1.1

Federal Crop Insurance Corporation Program Fund 9,162.3 179.8 2.0

Department of Commerce 56.5 0.1 —

Funds Received by National Oceanic and 

Atmospheric Administration under Disaster Relief 

Appropriations Act (DRAA)

56.5 0.1 0.0

Department of Defense 516,980.7 957.3 —

Military Health Benefits 23,883.3 150.2 0.6

Military Pay 96,777.3 182.5 0.2

Civilian Pay 61,811.2 68.1 0.1

Military Retirement 60,353.9 127.6 0.2

Travel Pay 5,278.7 263.3 5.0

Appendix I: Reported Improper Payment 

Estimates by Agency and Program for Fiscal 

Year 2017
Appendix I: Reported Improper Payment 

Estimates by Agency and Program for Fiscal 

Year 2017

Page 29 GAO-18-377 Improper Payments

Agency/program

Reported for fiscal year 2017

Program outlays 

(millions of dollars)

Improper 

payment estimate 

(millions of dollars)

Improper

payment rate

(percentage)

Defense Finance and Accounting Service 

Commercial Pay

259,165.2 0.9 0.0

U.S. Army Corps of Engineers (USACE) Commercial 

Pay

8,945.1 163.2 1.8

USACE Travel Pay 196.0 1.6 0.8

Navy Commercial Bill Pay Office – Naples 570.1 0.0 0.0

Department of Education 122,304.1 6,073.0 —

Pell Grants 26,914.7 2,209.7 8.2

Direct Loan 95,389.3 3,863.3 4.1

Department of Health and Human Services 1,015,684.6 90,113.1 —

Medicare Fee-for-Service (Parts A and B) 380,762.0 36,208.0 9.5

Medicare Advantage (Part C) 172,768.1 14,351.7 8.3

Medicare Prescription Drug Benefit (Part D) 77,450.3 1,295.6 1.7

Medicaid 363,839.4 36,731.1 10.1

Children’s Health Insurance Program 14,305.1 1,236.1 8.6

Foster Care 747.0 53.3 7.1

Disaster Relief – Head Start 2.9 0.0 0.0

Disaster Relief – Social Services Block Grant 63.6 0.0 0.0

Child Care 5,746.3 237.3 4.1

Department of Homeland Security 12,219.4 108.9 —

Customs and Border Protection – Refund and 

Drawback

1,875.0 14.8 0.8

Federal Emergency Management Agency (FEMA) –

Assistant to Firefighters Grants

299.2 0.3 0.1

FEMA – Flood Risk Map and Risk Analysis 132.0 4.3 3.3

FEMA – Homeland Security Grant Program 1,280.2 4.9 0.4

FEMA – National Flood Insurance Program 2,339.8 0.3 0.0

FEMA – Public Assistance 3,410.7 34.1 1.0

FEMA – Vendor Pay 974.1 43.0 4.4

Immigration and Customs Enforcement –

Enforcement and Removal Operations

1,828.2 6.0 0.3

Science and Technology – Sandy 0.7 0.0 0.0

U.S. Coast Guard – Sandy 79.5 1.1 1.4

Department of Housing and Urban Development 9,637.2 102.8 —

Office of Public and Indian Housing – Tenant-Based 

Rental Assistance

7,544.7 102.8 1.4

Community Development and Planning – DRAA 2,092.4 0.0 0.0
Appendix I: Reported Improper Payment 

Estimates by Agency and Program for Fiscal 

Year 2017

Page 30 GAO-18-377 Improper Payments

Agency/program

Reported for fiscal year 2017

Program outlays 

(millions of dollars)

Improper 

payment estimate 

(millions of dollars)

Improper

payment rate

(percentage)

Department of Justice 1.9 0.0 —

Law Enforcement 1.9 0.0 0.0

Prisons and Detention 0.0 0.0 0.0

Department of Labor 35,310.1 4,123.1 —

Unemployment Insurance 32,530.0 4,065.9 12.5

Federal Employees Compensation Act 2,780.1 57.2 2.1

Department of Transportation 46,564.2 141.4 —

Highway Planning and Construction 43,909.4 132.6 0.3

High-Speed Intercity Passenger Rail 2,102.9 4.1 0.2

Federal Transit Administration Emergency Relief 

Program – DRAA

551.8 4.7 0.8

Office of the Inspector General - DRAA 0.1 0.0 2.5

Department of the Treasury 67,992.5 16,231.6 —

Earned Income Tax Credit 67,992.5 16,231.6 23.9

Department of Veterans Affairs (VA) 103,203.5 10,663.8 —

Beneficiary Travel 889.9 223.8 25.1

Civilian Health and Medical Program of the VA 1,247.5 70.0 5.6

VA Community Care 5,628.9 5,257.6 93.4

Purchased Long-Term Services and Support 1,890.5 1,890.5 100.0

State Home Per Diem Grants 1,188.8 15.6 1.3

Supplies and Materials 2,556.9 479.8 18.8

Prosthetics 2,415.9 1,448.3 59.9

Medical Care Contracts and Agreements 947.3 157.3 16.6

Communications, Utilities, and Other Rent 1,444.2 352.7 24.4

Compensation 67,696.7 456.2 0.7

Pension 5,542.5 145.9 2.6

Education – Chapter 33 11,719.6 166.2 1.4

Disaster Relief Act – Hurricane Sandy 34.8 0.0 0.1

Environmental Protection Agency 4,356.6 15.8 —

Clean Water State Revolving Fund 1,431.4 2.6 0.2

Drinking Water State Revolving Fund 1,183.9 0.8 0.1

Grants 1,726.9 12.4 0.7

Hurricane Sandy Disaster Relief Fund 14.3 0.0 0.3

Federal Communications Commission 9,649.0 442.4 —

Universal Service Fund (USF) – High Cost 4,652.0 2.5 0.1
Appendix I: Reported Improper Payment 

Estimates by Agency and Program for Fiscal 

Year 2017

Page 31 GAO-18-377 Improper Payments

Agency/program

Reported for fiscal year 2017

Program outlays 

(millions of dollars)

Improper 

payment estimate 

(millions of dollars)

Improper

payment rate

(percentage)

USF – Schools and Libraries 2,388.0 103.5 4.3

USF – Lifeline 1,534.0 336.4 21.9

Interstate Telecommunications Relay Services 1,075.0 0.0 0.0

General Services Administration 5,515.0 109.1 —

Rental of Space 5,486.4 107.8 2.0

Purchase Cards 28.6 1.3 4.5

Office of Personnel Management 133,191.0 341.4 —

Retirement 82,913.0 313.8 0.4

Federal Employee Health Benefit 50,278.0 27.6 0.1

Railroad Retirement Board 12,517.8 78.7 —

Retirement and Survivors Benefits 12,362.0 74.7 0.6

Railroad Unemployment Insurance Act 155.8 4.0 2.5

Small Business Administration 24,733.2 450.3 —

7(a) Guaranty Purchases 655.6 28.4 4.3

7(a) Guaranty Approvals 18,116.0 233.9 1.3

504 Certified Development Company Guaranty 

Approvals

4,947.6 59.2 1.2

Disaster Loan Disbursements 903.9 123.4 13.7

Disbursements for Goods and Services 110.2 5.5 5.0

Social Security Administration 967,954.4 7,598.3 —

Old-Age, Survivors, and Disability Insurance 911,200.3 2,578.4 0.3

Supplemental Security Income 56,754.1 5,019.9 8.8

Source: GAO analysis of agencies’ fiscal year 2017 agency financial reports and Office of Management and Budget data on paymentaccuracy.gov. | GAO-18-377

Notes: Numbers may not add up to totals because of rounding. For programs using statistically valid 

estimation methodologies, improper payment estimates that comply with Office of Management and 

Budget guidance have a margin of error associated with them that is no greater than plus or minus 3 

percent of the total amount of all payments for the program at the 95 percent level of confidence.
Appendix II: Comments from the Office of 

Personnel Management

Page 32 GAO-18-377 Improper Payments

Appendix II: Comments from the Office of 

Personnel Management
Appendix II: Comments from the Office of 

Personnel Management

Page 33 GAO-18-377 Improper Payments
Appendix III: Comments from the Department 

of Defense

Page 34 GAO-18-377 Improper Payments

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 35 GAO-18-377 Improper Payments
Appendix IV: Comments from the Internal 

Revenue Service

Page 36 GAO-18-377 Improper Payments

Appendix IV: Comments from the Internal 

Revenue Service
Appendix IV: Comments from the Internal 

Revenue Service

Page 37 GAO-18-377 Improper Payments
Appendix IV: Comments from the Internal 

Revenue Service

Page 38 GAO-18-377 Improper Payments
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 39 GAO-18-377 Improper Payments

Beryl H. Davis, (202) 512-2623 or davisbh@gao.gov

In addition to the contact named above, Phillip McIntyre (Assistant 

Director), James M. Healy (Auditor in Charge), Daniel Flavin, and Fabiola 

Torres made key contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101247)
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 website (https://www.gao.gov). Each weekday afternoon, GAO 

posts on its website newly released reports, testimony, and correspondence. To 

have GAO e-mail you a list of newly posted products, go to https://www.gao.gov

and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of production and 

distribution and depends on the number of pages in the publication and whether 

the publication is printed in color or black and white. Pricing and ordering 

information is posted on GAO’s website, https://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, MasterCard, 

Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.

Visit GAO on the web at https://www.gao.gov.

Contact:

Website: https://www.gao.gov/fraudnet/fraudnet.htm

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

Orice Williams Brown, Managing Director, WilliamsO@gao.gov, (202) 512-4400, 

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

Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

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

Washington, DC 20548

James-Christian Blockwood, Managing Director, spel@gao.gov, (202) 512-4707

U.S. Government Accountability Office, 441 G Street NW, Room 7814, 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Strategic Planning and 

External Liaison

Please Print on Recycled Paper.