GAO

United States General Accounting Office

Report to the Chairman of the Committee 

on Governmental Affairs, U.S. Senate

October 1999 FINANCIAL 

MANAGEMENT

Increased Attention 

Needed to Prevent 

Billions in Improper 

Payments

GAO/AIMD-00-10

Page 1 GAO/AIMD-00-10 Improper Payments

Contents

Letter 5

Appendixes Appendix I: Executive Departments and Agencies Covered by 

the CFO Act 46

Appendix II: Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ Fiscal Year 1998 

Financial Statements 47

Appendix III: Assessment of Performance Plans for Those 

Agencies Reporting Improper Payments 56

Appendix IV: Comments From the Office of Management and 

Budget 58

Appendix V: GAO Contact and Staff Acknowledgements 60

Related GAO Products 61

Tables Table 1: Agencies and Programs that Reported Improper

Payments 16

Figures Figure 1: Trends in Certain Federal Expenditures: Fiscal

Years 1978 Through 2004 12

Figure 2: Improper Payments Returned to DFAS by DOD

Contractors for Fiscal Years 1994 Through 1998 19

Figure 3: Internal Control Weaknesses Cause Improper

Payments for 17 Programs 22

Figure 4: Program Design Issues for the Agencies Reporting

Improper Payments for 17 Programs 30

Figure 5: Reporting Improper Payments Within the Framework

of the CFO and Results Acts 39

Figure 6: Degree to Which 17 Programs Addressed Improper

Payments 40
Contents

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Abbreviations

ACF Administration for Children and Families

AFDC Aid to Families with Dependent Children

AID Agency for International Development

C&P Compensation and Pension Program

CFO Chief Financial Officer

CRP Conservation Reserve Program

CSRS Civil Service Retirement System

DCIA Debt Collection Improvement Act

DFAS Defense Finance and Accounting Service

DI Disability Insurance

DOD Department of Defense

DOL Department of Labor

ED Department of Education

EITC Earned Income Tax Credit

FASAB Federal Accounting Standards Advisory Board

FCIC Federal Crop Insurance Corporation

FECA Federal Employees’ Compensation Act

FEGLI Federal Employees’ Group Life Insurance

FEHBP Federal Employees’ Health Benefits Program

FEMA Federal Emergency Management Agency

FERS Federal Employees’ Retirement System

FFMSR Federal Financial Management System Requirements

FICA Federal Insurance Contributions Act

FNS Food and Nutrition Service

FSP Food Stamp Program

GAO General Accounting Office

GMRA Government Management Reform Act

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IG Inspector General

IRS Internal Revenue Service

JFMIP Joint Financial Management Improvement Program

NRCS Natural Resources Conservation Service

OASI Old Age and Survivors Insurance

OIG office of inspector general

OMB Office of Management and Budget

OPM Office of Personnel Management

PCIE President’s Council on Integrity and Efficiency

PHA Public Housing Authority
Contents

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SECA Self-Employment Contributions Act

SSA Social Security Administration

SSI Supplemental Security Income

STAR Systematic Technical Accuracy Review

TANF Temporary Assistance for Needy Families

USDA United States Department of Agriculture

VA Department of Veterans Affairs

VBA Veterans Benefits Administration
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United States General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-282920 Letr

October 29, 1999

The Honorable Fred Thompson

Chairman, Committee on Governmental Affairs

United States Senate

Dear Mr. Chairman:

The federal government—the largest and most complex organization in the 

world—annually expends hundreds of billions of dollars for a variety of 

grants, transfer payments, and procurement of goods and services. As the 

steward of taxpayer dollars, the federal government is accountable for how 

it spends those funds and is responsible for safeguarding against improper 

payments—that is, payments made for unauthorized purposes or excessive 

amounts, such as overpayments to program recipients or contractors and 

vendors. Reported estimates of improper payments total billions of dollars 

annually. Viewed in the simplest context, improper payments are an 

inefficient use of taxpayers’ funds. Specifically, for programs with 

legislative or regulatory eligibility criteria, improper payments indicate that 

agencies are spending more than necessary to meet program goals. 

Conversely, for programs with fixed funds, any waste of federal funds 

translates into serving fewer recipients or accomplishing less 

programmatically than could be expected.

Because of concerns regarding improper payments in light of the projected 

future growth of federal expenditures, you asked us to (1) quantify, where 

possible, amounts reported by agencies as improper payments in their 

fiscal year 1998 financial statements prepared pursuant to the Chief 

Financial Officers Act of 1990 (CFO Act),1

 (2) identify additional types of 

federal programs at risk of disbursing improper payments, (3) determine 

reported causes of improper payments prevalent across government, and 

(4) assess the extent to which agencies are addressing improper payments 

in their performance plans under the Government Performance and Results 

1

The CFO Act, as expanded by the Government Management Reform Act of 1994 (GMRA), 

requires 24 major departments/agencies to prepare and have audited agencywide financial 

statements. See appendix I for a list of the 24 CFO Act agencies.
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Act of 1993 (Results Act).2 We also considered the impact of potential Year 

2000 computing problems on improper payments.

Results in Brief In their fiscal year 1998 financial statement reports, nine agencies 

collectively reported improper payment estimates of $19.1 billion.3

 These 

improper payment estimates relate to 17 major programs4

 that expended 

approximately $870 billion.5

 The programs and related improper payment 

estimates include:

• Medicare Fee-for-Service ($12.6 billion),

• Supplemental Security Income ($1,648 million),

• Food Stamps ($1,425 million),

• Old Age and Survivors Insurance ($1,154 million),

• Disability Insurance ($941 million),

• Housing subsidies ($857 million), and

• Veterans Benefits, Unemployment Insurance, and others ($514 million).

Also included are the Agency for International Development (AID), 

Medicaid, and the Federal Crop Insurance Corporation. AID and the 

agencies administering these programs acknowledged making improper 

payments in their fiscal year 1998 financial statements, but did not disclose 

specific dollar amounts. 

While financial statement disclosures draw attention to the need to address 

this problem, the full extent of the government’s improper payments is not 

known. Improper payments are much greater than have been disclosed 

thus far in agency financial statement reports, as shown by our prior audits 

and those of agency inspectors general (IG). These audit reports identified 

additional agencies that made improper payments, such as the departments 

2

The Results Act requires agencies to prepare annual performance plans that include 

performance goals and measures, strategies, and resources required to achieve performance 

goals, and procedures to verify and validate performance information.

3

This includes $14.9 billion in improperly paid expenses and an additional $4.2 billion of 

receivables that these agencies expect to collect.

4

For purposes of this report, major programs include those that disburse $1 billion or more 

annually. Loan programs were not included in the scope of this review. See appendix II for a 

description of these agencies or their programs.

5

This amount primarily consists of programs’ fiscal year 1998 net outlays.
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of Defense (DOD) and Education (ED) and the Internal Revenue Service 

(IRS). For example, audits have disclosed that between fiscal years 1994 

and 1998, DOD contractors returned to the government $984 million that 

had been erroneously paid to them.

Agencies are not performing comprehensive quality control reviews—

internal studies or reviews—for certain programs to determine the 

propriety of program expenditures. As a result, the full extent of the 

problem—and possible solutions to it—is unknown. Comprehensive 

quality control reviews could also identify the causes of improper 

payments, which range from inadvertent errors to fraud and abuse. 

Improper payments can result from incomplete or inaccurate data used to 

make payment decisions, insufficient monitoring and oversight, or other 

deficiencies in agency information systems and weaknesses in internal 

control. This risk is inherently increased in programs involving (1) complex 

program regulations, (2) an emphasis on expediting payments, and (3) a 

significant volume of transactions. Audit reports note that other federal 

programs and activities for which agencies did not report improper 

payments experience the same kinds of problems as agencies that have 

acknowledged improper payments—problems that are major causes 

leading to improper payments. Thus, these programs also risk making 

improper payments.

Working with the Office of Management and Budget (OMB), some agencies 

are taking steps to mitigate this risk by focusing attention on identifying, 

reporting, and reducing improper payments through the discipline of 

annual audited financial statements and the development of performance 

goals6

—management reforms created by the Congress in the CFO Act and 

the Results Act. For example, the Department of Health and Human 

Services (HHS) has identified, reported in its financial statements, and 

substantially reduced improper payments in its $177 billion Medicare Feefor-Service program. For fiscal year 1996, through the process of preparing 

audited financial statements, HHS estimated $23.2 billion in improper 

payments—its first such estimate of the extent of this long-standing serious 

problem. HHS’ analysis of improper Medicare payments helped lead to the 

implementation of several initiatives to identify and reduce such payments. 

For fiscal year 1998, its estimate was significantly less—$12.6 billion. 

Future annual estimates of improper payments will provide further 

6

Performance goals are presented in agency performance plans, which are the vehicles 

agencies use to define their expected results for the fiscal year.
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information on the nature of the problem and the progress of these 

initiatives.

In another case, the Department of Housing and Urban Development 

(HUD) has also identified improper payments in its housing subsidy 

programs. For fiscal year 1998, HUD reported $857 million in improper 

payments. Similarly, the Department of Agriculture (USDA) disclosed

$1.4 billion in food stamp overissuances. USDA, HUD and HHS estimated 

improper payments by implementing methodologies that use statistical 

sampling. For certain other programs—particularly programs whose 

administration varies state-by-state—implementing a statistically valid 

methodology will not be easy. Without a baseline measurement of the 

extent of improper payments, agencies lack the information needed to 

address improper payments. By analyzing the characteristics of cases 

identified as having improper payments, agencies can then identify the 

circumstances and root causes leading to improper payments. This 

provides a foundation for developing sound strategies to mitigate improper 

payments in their programs. 

However, agencies responsible for 13 of the 17 programs having made 

improper payments—many of which we identified in our High-Risk and 

Performance and Accountability series issued earlier this year7

—did not 

include specific performance goals or strategies to comprehensively 

address these payments in their fiscal year 2000 performance plans under 

the Results Act. This may indicate inadequate attention to developing 

mechanisms to comprehensively address this serious problem. Thus, some 

agencies have not fully demonstrated the accountability Congress called 

for in the CFO and Results Acts. Without a systematic measurement of the 

extent of the problem, the establishment of expected results, and the 

periodic measurement and reporting on these results, agency management 

lacks the means to determine (1) whether the problem is significant enough 

to require corrective action or (2) the success of efforts implemented to 

reduce improper payments. 

As the federal budget grows, more taxpayer dollars are placed at risk, thus 

increasing the urgency for identifying and preventing these types of 

7

High-Risk Series: An Update (GAO/HR-99-1, January 1999) and Performance and 

Accountability Series: Major Management Challenges and Program Risks (GAO/OCG99-22SET, January 1999). These 2 series of reports outline actions needed to improve the 

performance and accountability of, and manage the risk relating to, our national 

government.
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payments and providing complete accountability to taxpayers. Finally, 

unless corrected, potential Year 2000 computing problems could have a 

costly, widespread impact on these programs—including the extent to 

which improper payments are made.

We are making recommendations to the Director of OMB directed at 

developing and implementing a methodology for annually estimating and 

reporting improper payments and for addressing improper payments in 

agencies’ annual performance and strategic plans and performance reports. 

In commenting on a draft of this report, OMB agreed that its focus on 

improper payments should be expanded.

Background Annually, the federal government expends hundreds of billions of dollars 

for a variety of grants, transfer payments, and procurement of goods and 

services. Because of its size, complexity, weak control environment, and 

insufficient preventive controls, the federal government risks disbursing 

improper payments. Agency-specific studies and audits have indicated that 

improper payments are a widespread and significant problem. They occur 

in a variety of programs and activities including those involving contract 

management, financial assistance benefits—such as Food Stamps and 

Veterans Benefits—and tax refunds. However, some overpayments, by their 

nature, are not considered improper payments, such as routine contract 

price adjustments.8

Legislative efforts have focused on improving the federal government’s 

control environment. For example, under the Federal Managers’ Financial 

Integrity Act of 1982 and the Federal Financial Management Improvement 

Act of 1996, agency managers are responsible for ensuring that adequate 

systems of internal controls are developed and implemented. An adequate 

system of internal controls, as defined by the Comptroller General’s 

internal control standards, which are issued pursuant to the Financial 

Integrity Act, should provide reasonable assurance that an agency is 

effectively and efficiently using resources, producing reliable financial 

8

For example, a routine contract price adjustment allows for the payment of an expense at a 

provisional rate until the actual cost information is available and audited. When the actual 

cost is lower than that provisionally paid, an overpayment has occurred. These amounts 

may be offset in future payments or returned directly to the government. This type of 

overpayment is not considered an improper payment.
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reports, and complying with applicable laws and regulations.9 Accordingly, 

cost-effective internal controls should be designed to provide reasonable 

assurance regarding prevention of or prompt detection of unauthorized 

acquisition, use, or disposition of an agency’s assets.

Recent legislation has provided an impetus for agencies to systematically 

measure and reduce the extent of improper payments. For example, with 

the advent of the CFO Act, GMRA, and the Results Act, agencies are 

challenged to increase attention on identifying and addressing improper 

payments. The CFO Act, as expanded by GMRA, requires 24 major 

departments/agencies to prepare and have audited agencywide financial 

statements, which are intended to report an agency’s stewardship over its 

financial resources—including how it expended available funds. The Office 

of Management and Budget’s Bulletin 97-01, Form and Content of Agency 

Financial Statements, provides implementing guidance on these CFO Act 

requirements. In addition, the CFO Act sets expectations for agencies to 

routinely produce sound cost and operating performance information. 

Effective implementation of this requirement would enable managers to 

have timely information for day-to-day management decisions. The CFO 

Act also requires OMB to prepare and annually revise a governmentwide 5-

year financial management plan and status report that discusses the 

activities the executive branch plans to and has undertaken to improve 

financial management in the federal government. Additionally, each agency 

CFO is responsible for developing annual plans to support the 

governmentwide 5-year financial management plan.

The Results Act seeks to improve the effectiveness and efficiency of the 

federal government by requiring that agencies develop strategic and annual 

performance goals and report on their progress in achieving these goals. 

Agency strategic plans are required to include the agency’s mission 

statement; identify long-term general goals, including outcome-related 

goals and objectives; and describe how the agency intends to achieve these 

goals. Agencies are required to consult with the Congress when developing 

their strategic plans and consider the views of other interested parties. In 

their annual performance plans, agencies are required to set annual goals, 

covering each program activity in an agency’s budget, with measurable 

target levels of performance. Agencies are also required to issue annual 

performance reports that compare actual performance to the annual goals. 

9

Standards for Internal Control in the Federal Government, Exposure Draft (GAO/AIMD99-21.3.1, May 1999).
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Together, these plans and reports are the basis for the federal government 

to manage for results. The Results Act is supported by the development of 

federal cost accounting standards under the CFO Act, which require 

agencies to identify the costs of government activities.10 These standards 

can lead to and support linking costs with achieving performance levels. 

This can give managers information for assessing the full costs of goods, 

services, and benefits compared to program outputs and results. Such 

information can provide the basis for agencies to develop performance 

goals to monitor and track improper payments as well as strategies for 

preventing such future disbursements. 

The risk of improper payments and the government’s ability to prevent 

them will continue to be of concern in the future. Under current federal 

budget policies, as the baby boom generation leaves the workforce, 

spending pressures will grow rapidly due to increased costs of Medicare, 

Medicaid, and Social Security.11 Other federal expenditures are also likely 

to increase. Thus, absent improvements over internal controls, the 

potential for additional or larger volumes of improper payments will be 

present. Figure 1 illustrates the reported and projected trends in federal 

expenditures, excluding interest on the public debt, for fiscal years 1978 

through 2004.

10Statement of Federal Financial Accounting Standards No. 4, Managerial Cost Accounting 

Standards; Managerial Cost Accounting System Requirements, Federal Financial 

Management System Requirements (FFMSR) 8, Joint Financial Management Improvement 

Program (JFMIP), February 1998; The Managerial Cost Accounting Implementation Guide, 

Chief Financial Officers Council and JFMIP, February 1998.

11Federal Debt: Answers to Frequently Asked Questions—An Update (GAO/OCG-99-27, May 

28, 1999) and Medicare and Budget Surpluses: GAO’s Perspective on the President’s 

Proposal and the Need for Reform (GAO/T-AIMD/HEHS-99-113, March 10, 1999).
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Figure 1: Trends in Certain Federal Expenditures: Fiscal Years 1978 Through 2004

Note: Expenditures for fiscal years 1999-2004 are projections.

Source: Budget of the United States Government, Fiscal Year 2000, “Historical Tables.”

Historically, the recovery rates for certain programs identified as having 

improper payments have been low. Therefore, it is critical that adequate 

attention be directed to strengthen controls to prevent improper payments.

Scope and 

Methodology

This report is based on our reviews of available major agencies’ fiscal year 

1998 financial statement reports prepared under the CFO Act, as expanded 

by GMRA. We reviewed these reports to identify amounts of reported 

improper payments. We also identified and reviewed recent GAO reports to 

identify additional types of programs at risk. We supplemented our review 

with IG reports from CFO Act agencies and other information obtained 

from a variety of sources, such as agency studies. In addition, we reviewed 

these data sources to discern the causes of improper payments. For the 

nine agencies that reported improper payments in their financial statement 

reports, we reviewed the agencies’ Results Act performance plans for fiscal 

year 2000 to determine the extent to which the plans addressed improper 

payments. We relied on recent GAO reports and guidance to consider any 

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Other

Social Security

Defense

Medicare

Medicaid

Dollars in billions

Fiscal year
B-282920

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impact from potential Year 2000 computing problems on improper 

payments. In selected cases, we interviewed agency CFO and IG personnel. 

Because of the nature of improper payments, our review would not capture 

all reported instances of such payments.12 As requested, relevant GAO 

reports covering our work in these areas for the past 4 fiscal years are 

listed at the end of this report.

To gather information on existing financial statement and performance 

reporting criteria, we reviewed relevant professional literature, including 

the American Institute of Certified Public Accountants’ Codification of 

Statements on Auditing Standards and the Federal Accounting Standards 

Advisory Board’s (FASAB) Statements of Federal Financial Accounting

Concepts and Standards. In addition, we reviewed OMB Bulletin 97-01, 

Form and Content of Agency Financial Statements and OMB Circular A-11, 

Part 2, Preparation and Submission of Strategic Plans, Annual Performance 

Plans, and Annual Program Performance Reports.

We performed our work from June 1998 through August 1999. Our work 

was conducted in accordance with generally accepted government auditing 

standards. We provided a draft of this report for comment to the Director of 

the Office of Management and Budget (OMB). These comments are 

presented and evaluated in the “OMB Comments and Our Evaluation” 

section and reprinted in appendix IV.

12For example, to the extent that individuals who owe the federal government for certain 

programs and/or activities receive other federal benefits and payments, such amounts 

constitute missed opportunities for collection. If outstanding amounts are owed to the 

government for one type of program or activity, these amounts could be collected through 

either offsetting or levying other federal benefits and payments. Along these lines, the Debt 

Collection Improvement Act (DCIA) of 1996 calls for the centralization and aggressive 

pursuit of delinquent nontax federal receivables, including delinquent loans and other forms 

of payment owed the federal government. The Department of the Treasury is developing a 

mechanism to pursue collection of outstanding federal receivables as mandated by DCIA, 

including the ability to offset tax refunds and levy federal benefits and payments to recover 

other amounts owed the federal government. However, it was beyond the scope of this 

report to consider the magnitude of payments that might otherwise be offset or levied to 

recover other delinquent amounts owed or to review Treasury’s efforts to implement DCIA. 

See Unpaid Payroll Taxes: Billions in Delinquent Taxes and Penalty Assessments Are Owed

(GAO/AIMD/GGD-99-211, August 2, 1999).
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Improper Payments 

Are Widespread Across 

Government, but the 

Full Extent Is 

Unknown

Agency-specific studies performed by GAO, IGs, and others indicate that 

improper payments are a widespread and significant problem. However, 

efforts by agencies to develop comprehensive estimates have varied. Nine 

agencies have taken the initiative to disclose improper payments for 17 of 

their programs in their financial statement reports, which has resulted in 

the disclosure of important information for oversight and decision-making. 

At the same time, the methodologies used by some agencies to estimate 

improper payments do not always result in complete estimates, and many 

other agencies have not even attempted to identify or estimate improper 

payments. As a result, the full extent of improper payments 

governmentwide is largely unknown, which hampers efforts to reduce such 

payments. Ascertaining the full extent of improper payments 

governmentwide is critical to determining related causes. Obtaining these 

data would give agencies baseline information for making cost-effective 

decisions about enhancing controls to minimize improper use of federal 

resources. 

Nine Agencies Reported 

Improper Payments, but 

Estimates Are Incomplete

Nine of the CFO Act agencies that had issued their fiscal year 1998 audited 

financial statements as of the end of our field work,13 acknowledged 

making improper payments. For fiscal year 1998, HHS,14 USDA, and HUD 

collectively reported improper payments of $14.9 billion as part of their 

program expenses in their financial statement reports. HHS’ estimated 

improper Medicare benefit payments constitute $12.6 billion of this 

amount, which represents 7.1 percent of the $177 billion in Fee-for-Service 

payments processed in fiscal year 1998. USDA disclosed $1.4 billion in food 

stamp overissuances or approximately 7 percent of its annual program cost 

of $20.4 billion. HUD’s excess housing subsidy payments totaled

$857 million, or 4.6 percent of its rental assistance payments for this $18.6 

billion program. These agencies have made significant progress in 

estimating and reporting improper payments for these programs by 

implementing methodologies that use statistical sampling. However, 

implementing a statistically valid methodology will pose challenges to 

agencies for certain programs.

13Four of the 24 CFO Act agencies—the departments of Education and State, the 

Environmental Protection Agency, and the Small Business Administration had not issued 

audited financial statements for fiscal year 1998 as of the end of our field work.

14HHS also reported $6.5 million in improper payments for its Administration for Children 

and Families programs that spent $32 billion in fiscal year 1998.
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The disclosure methods used by HHS, USDA, HUD, and the other six 

agencies varied. Some agencies, such as the Social Security Administration 

(SSA), reported known improper payments as receivables and provided 

explanatory disclosures in the notes accompanying their financial 

statements. Other agencies disclosed explanatory information in other 

sections of their financial statement reports, such as in management’s 

discussion and analysis or in supplemental data sections. In addition, 

reporting within agencies for different programs also varied. For example, 

USDA disclosed improper payments of $1.4 billion for the Food Stamp 

Program, but only acknowledged making improper payments without 

providing a specific amount for its Federal Crop Insurance Corporation 

(FCIC).

Three of the nine agencies reported improper payments as expenses for 4 

programs, while five agencies reported them as accounts receivable for 10 

programs. Three agencies acknowledged making improper payments, but 

did not quantify the dollar amounts for three programs. Eleven of the CFO 

Act agencies did not report any information related to improper payments 

in their financial statement reports. Such inconsistent financial reporting 

makes it difficult to quantify the extent of the problem governmentwide 

and indicates a need for more guidance. To address this issue, OMB is 

contemplating revising its guidance to provide uniform reporting and 

disclosure of improper payments by management. In addition, OMB has 

made error reduction in the distribution of benefits a Priority Management 

Objective,15 which is monitored by the OMB Director. OMB works with 

agencies on an individual basis to address these issues in ways most 

appropriate to the individual programs. For example, OMB is working with 

ED and the Department of the Treasury to examine ways to implement new 

statutory authorization for IRS verification of income of student aid 

applicants, in accordance with existing tax and privacy laws.

Table 1 lists the nine agencies and the manner in which they reported 

improper payments in their fiscal year 1998 financial statement reports for 

the 17 programs identified. See appendix II for a description of these 

agencies and/or their programs.

15Priority Management Objectives focus the administration’s efforts to meet some of the 

government’s biggest management challenges. They are specific management initiatives 

covering a wide range of concerns—ranging from meeting the Year 2000 computer challenge 

to implementing the restructuring of IRS.
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Table 1: Agencies and Programs that Reported Improper Payments

a

Acknowledged within the financial statement report, but no amount specifically included.

b

This represents a combination of programs at AID for which improper payments were not separately 

reported.

Source: GAO analysis based on a review of the CFO Act agencies’ fiscal year 1998 financial statement 

reports.

Reported in financial statements

Department or 

Agency Program

As a fiscal year 1998 

expense

As part of multiyear 

accounts receivable Othera

Agency for 

International 

Development (AID)

Not specifically identifiedb X

Department of 

Agriculture

Federal Crop Insurance 

Corporation

X

Food Stamp Program X

Department of Health 

and Human Services

Various Programs under 

the Administration for 

Children and Families

X

Medicare Fee-for-Service X

Medicaid X

Department of Housing 

and Urban 

Development

Housing Subsidy 

Programs

X

Department of Labor 

(DOL)

Federal Employees’ 

Compensation Act

X

Unemployment Insurance X

Office of Personnel 

Management (OPM)

Federal Employees’ Group 

Life Insurance

X

Federal Employees’ Health 

Benefits

X

Retirement X

Social Security 

Administration

Disability Insurance X

Old Age and Survivors 

Insurance

X

Supplemental Security 

Income

X

Department of the 

Treasury − Customs

Drawbacks and Refunds X

Department of 

Veterans Affairs (VA)

Veterans Benefits X
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The extent of the problem for certain of these agencies’ programs is 

unknown because agencies are not performing comprehensive quality 

control reviews to estimate the range and/or identify rates of improper 

payments. For example:

• SSA reported $2.5 billion in gross receivables as overpayments related 

to its Supplemental Security Income (SSI) program—a $27 billion 

program annually providing cash assistance to about 7 million 

financially needy individuals who are aged, blind, or disabled. These 

receivables consist of amounts specifically identified over multiple 

years based on SSA’s discussions with recipients and the results of its 

efforts in matching data provided by recipients with information from 

other federal and state agencies, such as IRS 1099 information, VA 

benefits data, and state-maintained earnings and employment data. SSA 

reports a statistically based accuracy rate for new SSI awards of 92.5 

percent.16 However, this accuracy rate does not consider the medical 

eligibility of recipients. Since the majority of SSI program dollars are 

historically directed to recipients with medical disabilities, refining the 

methodology to factor in any questions concerning medical risk is 

critical to determining improper payments within this program. 

According to SSA’s year 2000 performance plan, SSA is developing a 

comprehensive mechanism for quantifying dollar errors related to SSI 

disability benefit payments. However, no timing for implementation has 

yet been determined.

• Although HHS reported $12.6 billion in improper payments for its

$177 billion Medicare Fee-for-Service program based on a statistically 

valid sample, it has not attempted to estimate improper payments for 

the $98 billion Medicaid program. The HHS IG reported17 that the Health 

Care Financing Administration (HCFA)—the HHS agency responsible 

for overseeing the Medicaid program—has no comprehensive quality 

assurance program or other methodology in place for estimating 

improper Medicaid payments. Administered by state agencies, Medicaid 

provided health care services to approximately 33 million low-income 

16This represents the fiscal year 1997 initial payment accuracy rate as reported in SSA’s fiscal 

year 1998 Accountability Report.

17Report on the Financial Statement Audit of the Health Care Financing Administration for 

Fiscal Year 1998 (Department of Health and Human Services’ Office of Inspector General 

Audit Report, CIN A-17-98-00098, February 26, 1999).
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individuals. The IG recommended that HCFA work with the states to 

develop a methodology to determine the range of improper payments in 

the Medicaid program. However, developing a statistically valid 

methodology to estimate Medicaid improper payments poses a 

challenge. Other state-administered or intergovernmental programs also 

face difficulties in developing estimates due to the variable nature of the 

programs and the need to gain the cooperation of state and local 

government officials nationwide. HCFA has recently drafted a strategy 

for discussing this issue with states.

Other Programs and 

Activities Have Improper 

Payments or Are at Risk

Previous audits conducted by GAO and IGs have identified several other 

agencies, such as DOD, ED, and IRS that had improper payments. As 

illustrated in figure 2, between fiscal years 1994 and 1998, DOD contractors 

voluntarily returned $984 million that DOD’s Defense Finance and 

Accounting Service (DFAS) erroneously paid them—resulting from 

inadvertent errors, such as paying the same invoice twice or misreading 

invoice amounts. As a result, the contractors, as opposed to DOD, were 

determining the existence and amount of erroneous payments. As part of 

its stewardship duties, DOD is responsible for making these 

determinations. However, DOD has not yet made a comprehensive estimate 

of improper payments to its contractors, and there are likely more 

overpayments that have yet to be identified and returned. With an annual 

budget of over $130 billion in purchases involving contractors, DOD would 

benefit from estimating the magnitude of improper payments.
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Figure 2: Improper Payments Returned to DFAS by DOD Contractors for Fiscal Years 

1994 Through 1998

Source: DOD Contract Management: Greater Attention Needed to Identify and Recover Overpayments

(GAO/NSIAD-99-131, July 19, 1999).

ED is another agency with improper payments. ED’s student financial 

assistance programs have been designated as high risk18 since our 

governmentwide assessment of vulnerable federal programs began in 1990. 

ED provides over $8 billion in grants to assist over 4 million students in 

obtaining postsecondary education. As discussed in our January 1999 

18High-Risk Series: An Update (GAO/HR-99-1, January 1999).
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Performance and Accountability Series,19 ED-administered student 

financial aid programs have a number of features that make them 

inherently risky. They provide grants to a population composed largely of 

students who would not otherwise have access to the funds necessary for 

higher education. ED estimates20 that $78.9 million, or 1 percent, was 

misspent by grantees in fiscal year 1997; however, an ED IG report21

indicates that this estimate may be incomplete. A more complete estimate 

would allow ED to identify areas of greater risk and target corrective 

actions.

Also, the Earned Income Tax Credit (EITC) program—a refundable tax 

credit available to low income, working taxpayers—has historically been 

vulnerable to high rates of invalid claims. During fiscal year 1998, IRS 

reported that it processed EITC claims totaling over $29 billion, including 

over $23 billion (79 percent) in refunds.22,23 Of the 290,000 EITC tax returns 

with indications of errors or irregularities that IRS examiners reviewed, 

$448 million (68 percent of the $662 million claimed) was found to be 

invalid during fiscal year 1998. The IRS has not disclosed any estimated 

improper payments in its financial statement reports. IRS examinations of 

tax returns claiming EITC are important control mechanisms for detecting 

questionable claims and providing a deterrent to future invalid claims. 

However, because examinations are often performed after any related 

refunds are disbursed, they are less efficient and effective than preventive 

controls designed to identify invalid claims before refunds are made. OMB 

has worked with IRS to start a 5-year compliance initiative to minimize 

losses in this area. This initiative is intended to increase taxpayer 

awareness, strengthen enforcement of EITC requirements, and research 

sources of EITC noncompliance. EITC compliance efforts include a 

significant focus on pre-refund fraud/error prevention and detection. For 

19Major Management Challenges and Program Risks: Department of Education (GAO/OCG99-5, January 1999).

20Fiscal Year 1997 Department of Education Financial Statement Audit (Department of 

Education OIG Audit Report ACN 17-70002, June 15, 1998).

21Accuracy of Student Aid Awards Can Be Improved By Obtaining Income Data From the 

Internal Revenue Service (Department of Education OIG Audit Report ACN 11-50001, 

January 29, 1997).

22EITC claims do not always result in refunds. They may also reduce tax assessments.

23Financial Audit: IRS’ Fiscal Year 1998 Financial Statements (GAO/AIMD-99-75, March 1, 

1999).
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example, the EITC compliance initiative includes recalculation of 

erroneous overclaims, identification of questionable returns, and initiation 

of many EITC audits, all of which should occur prior to issuing refunds. 

However, our work has shown that even in cases where IRS has identified 

potentially erroneous claims, it released refunds prior to completing the 

reviews.

Other types of federal programs and activities that undergo audits also risk 

making improper payments. Internal control deficiencies and other 

problems similar to those prevalent in programs that have acknowledged 

improper payments suggest that additional federal financial assistance 

programs, contract management activities, and other miscellaneous 

programs may also be particularly vulnerable to disbursing improper 

payments. For example, USDA’s IG reported24 that the Natural Resources 

Conservation Service (NRCS) exhibited significant control weaknesses 

when determining if farmers qualified for annual payments under the 

Conservation Reserve Program (CRP). CRP, which disbursed $1.7 billion in 

fiscal year 1998, provides incentives and financial assistance to farmers and 

ranchers to retire environmentally sensitive land from production. Due to 

these control weaknesses, the USDA IG noted that CRP risked making 

incorrect decisions. These incorrect decisions could result in USDA 

disbursing improper payments. Without a measurement of the extent of 

improper payments, it is difficult to assess the appropriate level of 

management attention needed to mitigate these program risks. 

Once agencies have implemented methodologies to estimate the amount of 

improper payments, they can use this information to develop error rates. 

Agencies may find it useful to compute the dollar amount of errors as a 

percentage of program outlays, and the number of transaction errors as a 

percentage of the total number of transactions processed. Management 

could then use these error rates to evaluate whether further action is 

needed to address improper payments.

24United States Department of Agriculture Office of Inspector General’s Semi-Annual 

Report, October 1 − March 31, 1998.
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Internal Control 

Weaknesses Cause 

Improper Payments

Pervasive deficiencies in internal control across the federal government 

result in the payment of federal funds for purposes other than those 

originally intended. For example, several agencies face challenges in 

ensuring adequate controls for assessing beneficiaries’ initial and 

continued eligibility due to ineffective data sharing and sources of 

information. Also, some agencies have insufficient oversight and 

monitoring mechanisms, such as site visits and reviews of appropriate 

documentation, to ensure the validity of payments—particularly for federal 

financial assistance programs. Systems deficiencies also contribute to 

improper payments when accurate or timely data are not always available 

for payment decisions. Figure 3 illustrates our categorization of internal 

control weaknesses that contribute to improper payments within the 17 

programs where agencies reported improper payments.

Figure 3: Internal Control Weaknesses Cause Improper Payments for 17 Programs

Note: Six of the17 programs have two or more internal control weaknesses reported in this chart.

Source: GAO analysis based on prior IG and GAO reports.

Internal Controls Over 

Eligibility Determinations 

Are Often Inadequate

As highlighted in our reviews of GAO and IG reports, ensuring adequate 

controls over determining beneficiaries’ eligibility often proves difficult for 

many agencies. Initial and/or continued eligibility determination problems 

were noted for 10 of the 17 programs that reported improper payments. For 

instance, initial eligibility for HUD’s Section 8 and Public Housing 

programs—providing $18.6 billion in rental assistance for lower income 

families in fiscal year 1998—is primarily based on an applicant’s self10

7 7

0

17

Inadequate eligibility

controls

Insufficient

oversight/monitoring

System deficiencies

Programs
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reported income. According to HUD’s IG,25 HUD regulations require owners 

and housing authorities to verify the information provided, but this process 

often lacks effective controls to ensure that verifications are adequately 

performed. In addition, the IG reported that recipients do not always report 

complete or accurate information. Consequently, improper payments have 

occurred. To improve HUD’s procedures for verifying participant’s income 

and correct this long-standing problem, the HUD IG recommended the 

following actions: (1) on-site reviews to assess first hand the housing 

subsidy administrator’s control environment, (2) confirmations with third 

parties, and (3) computerized income verification matching to IRS and SSA 

records. As discussed in our January 1999 Performance and Accountability 

Series,26 HUD unveiled a multifaceted plan to identify households’ 

unreported and/or underreported income in fiscal year 1998. The plan 

includes steps to (1) further expand HUD’s computer matching efforts,

(2) strengthen recertification policies and procedures, (3) ensure that 

HUD’s information systems have accurate and complete data on tenants, 

(4) institute penalties, and (5) perform monitoring and oversight functions. 

OMB is also working with HUD in reducing payment errors in rental 

assistance due to recipient underreporting of income.

In another example, the DOL is challenged to correctly identify eligible 

recipients for its Unemployment Insurance (UI) program, which in fiscal 

year 1998 provided over 7 million unemployed workers with about $20 

billion in temporary financial support to facilitate re-employment. The DOL 

IG reported27 that state-administered claims offices, responsible for 

determining eligibility requirements, have ineffective controls to verify 

information provided by claimants. Claimants declaring themselves to be 

U.S. citizens are not screened for immigration legal status, which in some 

cases has resulted in improper payments. For example, ineligible 

individuals, including illegal aliens, were paid millions of dollars over an 

approximate 2-year time frame because states did not perform up-front 

verification of social security numbers provided by claimants. OMB has 

25Fiscal Year 1998 Department of Housing and Urban Development Financial Statement 

Audit (Department of Housing and Urban Development Office of Inspector General Audit 

Report 99-FO-177-0003, March 29, 1999).

26Major Management Challenges and Program Risks: Department of Housing and Urban 

Development (GAO/OCG-99-8, January 1999).

27Verification of Social Security Numbers Could Prevent Unemployment Insurance 

Payments to Illegal Aliens (U. S. Department of Labor Office of Inspector General Final 

Audit Report No. 04-98-001-03-315, March 2, 1998).
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worked with DOL to secure a congressional authorization for an integrity 

initiative focused on reducing benefit overpayments and improving UI tax 

compliance. 

Our analysis of GAO and IG reports also showed that, as with initial 

eligibility determinations, agencies’ controls are insufficient to ensure the 

continuing eligibility of beneficiaries for 8 of the 10 programs with 

eligibility determination problems. For example, SSA is mandated to 

perform reviews for continued eligibility for program benefits to aid in 

preventing fraud, waste, and abuse in the Disability Insurance (DI) 

program—a program to provide a continuing income base for more than

6 million disabled workers and eligible members of their families. However, 

acknowledged delays in performing these continuing disability reviews 

have undermined the effectiveness of this control.28 Because SSA disburses 

approximately $50 billion in disability benefit payments annually, it is 

critical that these reviews be performed promptly; otherwise, beneficiaries 

who are no longer eligible for this program may inappropriately receive 

benefits. SSA has a multiyear plan to become current with all disability 

reviews by 2002.29

Since 1996, the HUD IG has reported30 that HUD’s housing subsidy 

programs experience improper payments when beneficiaries’ income 

status changes and they do not notify housing authorities to adjust their 

benefits. Various legal, technical, and administrative obstacles impede 

housing authorities from ensuring that tenants report all income sources 

during the periodic determination to assess continuing eligibility. HUD has 

encouraged housing authorities to computer match with state agencies to 

detect unreported income, since housing authorities lack the legislative 

28Fiscal Year 1998 Social Security Administration Financial Statement Audit (Social Security 

Administration Office of Inspector General Report Number A-13-98-51036, November 20, 

1998) and Fiscal Year 1997 Social Security Administration Financial Statement Audit (Social 

Security Administration Office of Inspector General Report Number A-13-97-51012, 

November 21, 1997).

29Social Security Disability: SSA Making Progress in Conducting Continuing Disability 

Reviews (GAO/HEHS-98-198, September 18, 1998).

30Housing and Urban Development Audit of Fiscal Year 1998 Financial Statements (Housing 

and Urban Development OIG Audit Report 99-FO-177-0003, March 29, 1999); Housing and 

Urban Development Audit of Fiscal Year 1997 Financial Statements (Housing and Urban 

Development OIG Audit Report 98-FO-177-0004, March 20, 1998); and Housing and Urban 

Development Audit of Fiscal Year 1995 Financial Statements (Housing and Urban 

Development OIG Audit Report 96-FO-177-0003, August 16, 1996).
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authority to access IRS and SSA data. However, little progress has been 

made in this area, since most housing authorities do not have the systems 

expertise to effectively implement this technique.

In May 1998, the President’s Council on Integrity and Efficiency (PCIE)31

issued a report32 to highlight the need for increased cooperation among 

federal agencies in sharing income/financial resource information about 

federal program beneficiaries in an effort to improve controls over 

eligibility verification. For example, the report indicated that the DOL IG’s 

ability to ensure eligibility of Unemployment Insurance Program recipients 

could be enhanced by verifying employment status of those recipients with 

IRS or SSA wage records. Currently, DOL’s IG must coordinate with states, 

requiring subpoena authority in some cases, to obtain this information 

from states. Also, governmentwide, there is no omnibus authority for 

efficiently and effectively obtaining access to some data. We have work 

ongoing on this issue and will report at a later date.

Oversight and Monitoring 

Controls Are Insufficient

Our analysis of GAO and IG reports showed that insufficient federal 

monitoring and oversight of program expenditures exist in 7 of the 17 

programs where agencies reported improper payments. Effective federal 

monitoring assesses the quality of performance over time. It includes 

regular management and supervisory activities, such as periodic 

comparisons of expected and actual results and reconciliation of data to its 

source. Generally, activities such as site visits, reviews of progress and 

financial reports filed by contractors and grantees, and reviews of 

contracts and grant agreements are techniques often used by federal 

officials to oversee and monitor programs.

The lack of sufficient oversight and monitoring controls can lead to 

improper payments by fostering an atmosphere that invites fraud. For 

31The PCIE is comprised of all presidentially appointed IGs and members from OMB, the 

Federal Bureau of Investigation, the Office of Special Counsel, and the Office of 

Government Ethics.

32Eligibility Verification Needed to Deter and Detect Fraud in Federal Government Benefit 

and Credit Programs, PCIE, May 1998.
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instance, both we and the HHS IG have reported33 that HCFA’s insufficient 

oversight of the Medicare program hampered it from preventing improper 

Medicare payments. To fulfill its primary mission of providing health care 

coverage for approximately 39 million aged individuals, Medicare pays 

contractors to process claims for health care services. These contractors 

are responsible for all aspects of claims administration and serve as HCFA’s 

front line of defense against fraud and abuse. Yet, vulnerabilities in 

contractors’ procedures for paying Medicare claims have provided a lax 

environment. This environment permitted unscrupulous providers 

opportunities to obtain additional unjustified payments.34 These activities 

include billing for services never rendered, misrepresenting the nature of 

services provided, duplicate billing, and providing services that were not 

medically necessary. Although HCFA’s most recent estimate of improper 

payments in its $177 billion Medicare Fee-for-Service program amounted to 

$12.6 billion, this estimate did not consider improper payments made as 

part of another $33 billion Medicare Managed Care program.35 Therefore, 

the impact of insufficient monitoring and oversight on improper payments 

could be more extensive than current estimates indicate. To enhance 

HCFA’s oversight function, the HHS IG recommended that HCFA perform 

risk assessments of contractor functions to identify those functions that 

significantly affect the improper payment of claims. This would enable 

HCFA to target areas and strengthen related controls. 

The Agency for International Development (AID), which spent $5.2 billion 

in fiscal year 1998 to provide assistance to developing countries, also 

33Medicare Contractors: Despite Its Efforts, HCFA Cannot Ensure Their Effectiveness or 

Integrity (GAO/HEHS-99-115, July 14, 1999); Medicare: Improprieties by Contractors 

Compromised Medicare Program Integrity (GAO/OSI-99-7, July 14, 1999); and Department 

of Health and Human Services’ Office of Inspector General Semi-Annual Report to the 

Congress: April 1, 1998 − September 30, 1998.

34Department of Health and Human Services: Management Challenges and Opportunities

(GAO/T-HEHS-97-98, March 18, 1997); Report on the Financial Statement Audit of the Health 

Care Financing Administration for Fiscal Year 1998 (Department of Health and Human 

Services’ Office of Inspector General Audit Report Common Identification Number (CIN): 

A-17-98-00098, February 26, 1999); and Improper Fiscal Year 1998 Medicare Fee-for-Service 

Payments (Department of Health and Human Services’ Office of Inspector General Audit 

Report CIN: A-17-99-00099, February 9, 1999).

35Medicare beneficiaries have the option of enrolling in prepaid health care plans (typically 

health maintenance organizations) that are commonly referred to as managed care plans.
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suffers from insufficient monitoring and oversight. We reported36 that AID 

does not have accurate information to ensure that its operations and 

programs are being managed cost-effectively and efficiently. In addition, 

AID’s IG reported37 weaknesses in monitoring relief and rehabilitation 

activities. For example, mission employees in Rwanda, who were asked to 

monitor relief and rehabilitation activities, did not have basic 

documentation they needed to monitor relief efforts, such as copies of 

grant agreements, progress reports, and financial status reports. The 

impact of this control deficiency on improper payments was not quantified. 

Based on previous GAO38 and IG reports, insufficient oversight and 

monitoring is also present in other programs that have improper payments 

but did not report them. For example, according to the ED IG,39 audits 

performed under the Single Audit Act are ED’s principal control for 

ensuring that student financial assistance funds were being disbursed to 

eligible students in proper amounts. However, the IG noted that ED did not 

(1) ensure that all audit reports were received, (2) follow-up on problems 

identified, or (3) have a systematic process in place to measure trends in 

the misspending by grantees. The IG recommended that the department

(1) complete the development of an ongoing process to identify 

missing/delinquent audit reports, (2) take corrective actions against 

delinquent audit report filers, and (3) develop a systematic methodology to 

quantify costs to measure the effectiveness of monitoring efforts and 

trends among institutions. The IG also recommended that the department 

use a risk management model to determine how to effectively deploy 

limited monitoring resources. Without this type of information, the 

department is unable to make cost-benefit decisions to determine whether 

to strengthen preventive internal controls. 

36Major Management Challenges and Program Risks: Agency for International Development

(GAO/OCG-99-16, January 1999).

37Agency for International Development’s Office of Inspector General Semi-Annual Report 

to the Congress: April 1, 1997 − September 30, 1997.

38For example, Defense Health Care: DOD Needs to Improve Its Monitoring of Claims 

Processing Activities (GAO/T-HEHS-99-78, March 10, 1999), and Medicare HMO Institutional 

Payments: Improved HCFA Oversight, More Recent Cost Data Could Reduce Overpayments

(GAO/HEHS-98-153, September 9, 1998).

39See footnote 19.
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Systems Deficiencies Exist Deficiencies in agencies’ automated systems, or the lack of systems, 

prevent personnel from accessing reliable and timely information, which is 

integral to making disbursement decisions. As a result, improper payments 

frequently occur because agency personnel lack needed information, rely 

on inaccurate data, and/or do not have timely information. Agency systems 

deficiencies have been identified in prior GAO and IG reports for 7 of the 17 

programs reporting improper payments. For example, we reported40 that 

interstate duplicate participation in the Food Stamp Program goes 

undetected because there is no national system to identify participation in 

more than one state. While states may currently learn of some duplicate 

participation from SSA or through their own matching efforts with 

neighboring states, they rely primarily on applicants and clients to 

truthfully identify who resides in their households. USDA’s Food and 

Nutrition Service (FNS) manages the Food Stamp Program through 

agreements with state agencies. Because USDA’s most current annual 

estimate41 indicates that food stamp overissuances account for over 7 

percent of the program’s $20 billion in annual benefit expenses, it is critical 

that action be taken to strengthen systems and related controls. FNS is 

considering whether to establish a central system to help ensure that 

individuals participating in the Food Stamp Program are not being 

improperly included in more than one state.

System deficiencies are also a factor for agency programs that did not 

disclose improper payments. For example, DOD’s payment process suffers 

from nonintegrated computer systems that require data to be entered more 

than once in different systems, sometimes manually, which increases the 

possibility of erroneous or incomplete data. Also, DOD contracts may have 

from 1 to over 1,000 accounting classification reference numbers which 

involve extensive data entry, also increasing the chance for errors. As 

previously discussed, DOD contractors returned about $984 million 

between fiscal years 1994 and 1998 to the DFAS in Columbus, Ohio, as a 

40Food Stamp Overpayments: Households in Different States Collect Benefits for the Same 

Individuals (GAO/RCED-98-228, August 6, 1998).

41USDA Food and Nutrition Service’s Fiscal Year 1998 Financial Statements (USDA OIG 

Audit Report No. 27401-14-HY, February 1999). 
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result of duplicate and erroneous payments.42 We also reported43 that 

pervasive weaknesses in access controls in the Air Force vendor payment 

system application including inadequate separation of duties and other 

internal control deficiencies resulted in fraudulent payments and left DOD 

vulnerable to abuse. While no internal control system at DOD, or any other 

agency, can guarantee the elimination of improper payments and the 

prevention of fraud, resolving DOD’s systems problems and designing 

effective solutions to reduce related risks are of critical importance, 

particularly since DOD expenditures comprise nearly half of the federal 

government’s discretionary spending. We made several recommendations 

to resolve these deficiencies, such as suggesting that DOD limit vendor 

payment system access levels to those appropriate for the user’s assigned 

duties. DOD has a number of initiatives underway to help ensure that 

payments are proper—including the development of a standard core 

system for procurement. However, the new system is not scheduled to be 

fully implemented for several years. 

Similar to DOD, ED also lacks a fully functional integrated database to 

administer over $7 billion in federal student financial aid programs.44 As a 

result, it remains vulnerable to losses because the department and schools 

often do not have accurate, complete, and timely information on program 

participants needed to effectively and efficiently operate and manage its 

programs. We have reported45 that a lack of common identifiers for 

students and institutions makes it difficult to track them across systems. 

Because each system uses different combinations of data fields to uniquely 

identify, access, and update student records, duplicate student records 

have been identified in key systems. Many of ED’s student financial aid 

systems were developed independently over time by multiple contractors. 

Consequently, ED relies on various contractors to operate its numerous 

systems using different hardware and software. We recommended46 that 

42DOD Contract Management: Greater Attention Needed to Identify and Recover 

Overpayments (GAO/NSIAD-99-131, July 19, 1999).

43Financial Management: Improvements Needed in Air Force Vendor Payment Systems and 

Controls (GAO/AIMD-98-274, September 28, 1998).

44See footnote 19.

45Department of Education: Multiple, Nonintegrated Systems Hamper Management of 

Student Financial Aid Programs (GAO/T-HEHS/AIMD-97-132, May 15, 1997).

46Student Financial Aid Information: Systems Architecture Needed to Improve Programs’ 

Efficiency (GAO/AIMD-97-122, July 29, 1997).
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ED (1) develop and enforce a departmentwide systems architecture and

(2) ensure that the developed systems architecture addresses systems 

integration, common identifiers, and data standards. The Office of Student 

Financial Assistance has developed its Modernization Blueprint to guide 

the development of an integrated financial aid delivery system, which ED 

officials stated depicts the first 3 years of a continuing process of 

modernizing its system.

Program Design Issues 

Contribute to Improper 

Payments

Often, the nature of a program can contribute to the disbursement of 

improper payments. Many programs have complex program regulations, 

and several emphasize expediting payments or have high volumes of 

transactions to process. These program design issues inherently increase 

the potential for improper payments, yet such payments are virtually 

impossible to eliminate. However, strengthening business practices and 

developing targets or goals for reducing improper payments can mitigate 

the risk of improper payments occurring. Also, measuring progress in 

relation to such targets or goals may serve as a measure of the 

effectiveness of an agency’s improper payment reduction program. 

According to our analysis of GAO and IG reports, program design issues 

were present in programs with improper payments as illustrated in figure 4.

Figure 4: Program Design Issues for the Agencies Reporting Improper Payments for 

17 Programs

Note: Five of the 17 programs have 2 or more program design issues.

Source: GAO analysis based on prior work performed on these programs.

11

6

4

0

17

Complex regulations Speed of service Large volume of

transactions

Programs
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Some agencies currently have programs that use targets or goals to aid in 

reducing improper payments. One example is the Medicaid program, 

wherein states are responsible for determining the eligibility of 

beneficiaries and disbursing related federal funds. According to HHS 

regulations,47 states must have a payment error rate no greater than 3 

percent due to errors in eligibility determinations or HHS may disallow 

medical assistance payments. Another example is the Food Stamp Program 

administered by state agencies under USDA regulations. In this program, 

USDA may pay 50 percent of each state’s cost of administering the 

program. To encourage states to reduce their payment error rates, the 

program includes an incentive. This incentive allows USDA to increase the 

50 percent reimbursement for administrative costs, by as much as 10 

percent, to a total of 60 percent based on reductions in states’ error rates 

below 6 percent and on other conditions. State agencies also may be 

required to make payments to USDA if their payment error rate exceeds 

USDA’s national performance measure.48 State agencies may be required to 

invest in improving their administration of the program rather than making 

refunds. 

Complex Program 

Regulations Increase Risk of 

Improper Payments

Program complexity inherently increases the risk of improper payments. 

Previous GAO and IG reports disclosed this condition for 11 of the 17 

programs with reported improper payments. For example, the complexity 

of state Medicaid programs provide challenges for federal oversight 

because of the variations in managing these programs on a state-by-state 

basis. Medicaid—the primary source of health care for 12 percent of the 

U.S. population—provides matching grants to states based on formulas 

encompassing states’ per capita income. States have a variety of options for 

program administration. They can elect to administer the program at the 

state or county level. Also, they can operate a fee-for-service program, a 

managed care program, or some combination of the two. States may also 

elect to operate their claims processing systems directly or contract with 

private vendors. Because of the size of this program—it disbursed nearly 

$98 billion in federal funds during fiscal year 1998—it is critical that HCFA 

comprehensively estimate its improper payments to assess its risk and 

determine appropriate actions to strengthen oversight controls. Such 

4742 C.F.R. § 431.865(c).

487 U.S.C. § 2025(c); and 7 C.F.R. § 275.1.
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actions would help to ensure that HCFA is fulfilling its stewardship 

responsibilities for this program. 

Block grants present unique challenges to providing adequate 

accountability for federal funds. Block grants give states flexibility to adapt 

funded activities to fit state and local needs and devolve major 

responsibilities to the states themselves to oversee these programs.49 Under 

the Temporary Assistance for Needy Families (TANF) block grant, states 

are authorized to collectively spend up to $16.5 billion annually to provide 

assistance to needy families and promote work activities. To implement 

TANF, states and localities determine the range of services and eligibility 

criteria.

Many states manage the TANF, Food Stamp, and Medicaid programs 

through local offices, and depending upon the state, the same staff may be 

determining eligibility and benefit levels for all three programs. These 

programs’ eligibility rules and income tests are complex and differ from 

one another; thus, although all three programs consider assets and 

household income and size, the extent to which they do so varies. A 

requirement that recipients notify the staff when their income changes 

further complicates eligibility determinations—staff must use three sets of 

eligibility criteria to recalculate benefit levels. Given the complexity and 

diversity of eligibility rules among these three programs, it is a challenge at 

all levels of government to adequately oversee these programs, and 

improper payments are sometimes made.50

Speed of Service Issues, 

Coupled With Resource 

Constraints, Impact 

Improper Payments

Many programs’ missions emphasize speed of service. As a result, errors 

are more likely to occur, resulting in improper payments. We considered 

this condition to exist for 6 of the 17 programs with reported improper 

payments. It is also present in agencies that had improper payments but did 

not report them. For example, IRS’ ability to successfully meet the financial 

management challenges it faces must be balanced with the competing 

demands placed on its resources by its customer service and tax law 

compliance responsibilities. IRS is mandated to process tax refunds within 

45 days of receipt of a tax return. If the refund is not processed within this 

49Block Grants: Issues in Designing Accountability Provisions (GAO/AIMD-95-226, 

September 1, 1995).

50Welfare Benefits: Potential to Recover Hundreds of Millions More in Overpayments

(GAO/HEHS-95-111, July 20, 1995).
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time, IRS must remit interest payments to the taxpayer. However, IRS’ 

systems were not designed to handle this volume of information within 

these time frames. Further, we reported51 that IRS lacks critical preventive 

controls, such as comparing the information on tax returns to third-party 

data such as W-2s (Wage and Tax Statements) in a timely manner. As a 

result, the agency is unable to identify and correct discrepancies between 

these documents that allow duplicate refunds to be issued. Although IRS 

has detective (post-refund) controls in place, they often occur months after 

the returns are submitted and processed. Insufficient preventive controls 

expose the government to potentially significant losses due to 

inappropriate disbursement of refunds. According to IRS records, IRS’ 

investigators identified over $17 million in alleged fraudulent refunds that 

had been disbursed during the first 9 months of calendar year 1998. 

However, the full magnitude of improper payments disbursed by IRS is 

unknown. 

The Federal Emergency Management Agency’s (FEMA) Disaster Relief 

program is another example of how providing service—in this case, 

providing assistance to disaster victims—as quickly as possible increases 

the risk of improper payments being made. FEMA provided over

$2.2 billion in disaster relief in fiscal year 1998 to assist individuals, 

families, communities, and states in responding to and recovering from 

disasters, such as floods, hurricanes, and tornadoes. FEMA has set 

demanding performance goals for its disaster assistance activities, from 

acting within 12 hours on requests to supply disaster victims with water, 

food, and shelter, to processing disaster housing applications from eligible 

individuals within an average of 8 days.52 The IG has noted that achieving 

these goals will require FEMA to streamline operations and apply new 

technology to reduce waste and duplication of benefits. In past years, the 

IG has identified specific cases of individuals filing false claims to obtain 

FEMA disaster assistance; however, the full extent of this problem has not 

been quantified.

We recognize that delivering services expeditiously while ensuring that the 

right amount is paid to the right person poses a significant challenge for 

many agencies. Without state-of-the-art information management systems 

51See footnote 22.

52Annual Performance Plan Fiscal Year 2000 (Federal Emergency Management Agency, 

February 23, 1999).
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and appropriate sharing of data, agency personnel cannot readily access 

needed information for payment decisions and thus are hampered from 

preventing improper payments. Due to the diverse nature of programs, 

consulting with congressional oversight bodies would assist agencies when 

establishing targets and goals to reduce improper payments without 

impairing service delivery and be an important means of obtaining 

agreement with the Congress as to expected results for each program. 

Large Volumes of 

Transactions Increase Risk 

of Improper Payments

A significant volume of claims or payments is also a factor that contributes 

to improper payments, especially when compounded with resource 

constraints. Large volumes of claims were identified in 4 of the 17 

programs with reported improper payments. For example, in a single year, 

Medicare contractors process over 800 million claims with limited time for 

processing. IRS is another agency with large volumes of activity. For 

instance, in fiscal year 1998, it processed 1.4 billion tax and information 

returns, with 88 million involving refunds. Given the high volume of 

transactions, inadvertent clerical errors are more likely and they could 

result in improper payments. 

Potential Year 2000 

Problem Increases the 

Need for Effective 

Internal Controls

While implementing effective internal controls is and will be an ongoing 

concern, the Year 2000 problem53 presents a unique challenge to ensuring 

effective payments controls. Many of the federal government’s computer 

systems were originally designed and developed 20 to 25 years ago, are 

poorly documented, and use a wide variety of computer languages, many of 

which are obsolete. Some applications include thousands, tens of 

thousands, and even millions of lines of code, each of which must be 

examined for date-format problems. Moreover, federal programs are also 

vulnerable to Year 2000 risks stemming from items outside of their control, 

such as the Year 2000 compliance of critical business partners. Unless 

corrected, Year 2000 failures may have a costly, widespread impact on 

federal, state, and local governments—including the extent to which 

improper payments are made.

53The Year 2000 problem is rooted in how dates are recorded and computed. For the past 

several decades, computer systems typically used two digits to represent the year, such as 

“99” for 1999, in order to conserve electronic data storage and reduce operating costs. In this 

format, however, 2000 is indistinguishable from 1900 because both are represented as “00.” 

As a result, if not modified, systems or applications that use dates or perform date- or timesensitive calculations may generate incorrect results beyond 1999.
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These many risks increase the possibility that Year 2000 induced failures 

could result in increased number and amounts of improper payments as 

agencies attempt to sustain their core business functions. Further, 

nonexistent or ineffective internal controls, as previously discussed, 

increase this risk. Accordingly, the federal government could potentially 

distribute additional improper payments.

While the Year 2000 problem increases the risk of improper payments, as 

we reported54 earlier this year, it also provides the opportunity to 

institutionalize valuable lessons, such as the importance of reliable 

processes and reasonable controls. Our Year 2000 enterprise readiness 

guide55 calls on agencies to develop and implement policies, guidelines, and 

procedures in such critical areas as configuration management,56 quality 

assurance, risk management, project scheduling and tracking, and 

performance metrics. To address the Year 2000 problem, several agencies 

have implemented such policies. For example, HCFA has implemented 

policies and procedures related to configuration management, quality 

assurance, risk management, project scheduling and tracking, and 

performance metrics for its internal systems.

Most Agency 

Performance Plans Do 

Not Comprehensively 

Address Improper 

Payments

As previously discussed, nine agencies acknowledged making improper 

payments in 17 programs for fiscal year 1998. These agencies’ fiscal year 

2000 performance plans, under the Results Act, included performance 

goals and strategies that address key internal control weaknesses in four 

programs. For nine programs, the respective agencies did not 

comprehensively address improper payments in their plans. Improper 

payments were not addressed at all for the remaining four programs. 

Appendix III contains our assessment of the extent to which each agency 

reporting improper payments addressed them in its performance plan. For 

these and other agencies at risk, the first step in addressing improper 

payments is to identify the magnitude of these payments. Agencies can 

then analyze the characteristics of these cases to identify the 

54Year 2000 Computing Crisis: Defense Has Made Progress, but Additional Management 

Controls Are Needed (GAO/T-AIMD-99-101, March 2, 1999). 

55Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-10.1.14, September 1997).

56Configuration management is the continuous control of changes made to a system’s 

hardware, software, and documentation throughout the development and operational life of 

the system.
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circumstances and root causes leading to the improper payments. Using 

this analysis, agencies can make cost-benefit decisions on systems and 

other internal control improvements to mitigate the risk of improper 

payments and implement performance goals to manage for results. 

The use of appropriate performance goals relating to improper payments 

can focus management attention on reducing such payments. For example, 

HHS has reported a national estimate of improper payments in its Medicare 

Fee-for-Service benefits since fiscal year 1996. For fiscal year 1998, HHS 

reported estimated improper payments of $12.6 billion, or more than 7 

percent, in Medicare Fee-for-Service benefits—down from about $20 

billion, or 11 percent, reported for fiscal year 1997 and $23.2 billion, or 14 

percent, for fiscal year 1996. As discussed earlier, HCFA would also benefit 

from identifying improper payments and establishing related performance 

goals for its $98 billion Medicaid program.

Analysis of improper Medicare payments, as part of the financial statement 

preparation and audit process, helped lead to the implementation of 

several initiatives intended to identify and reduce improper payments. 

These initiatives included prepayment reviews of selected claims, an 

increase in the overall level of prepay and postpay claims reviews, and 

medical reviews of providers identified as having nonstandard billing 

practices. Annual estimates of improper payments in future audited 

financial statements will provide information on the progress of these 

initiatives. 

Without a systematic measurement of the extent of the problem, 

management cannot determine (1) if the problem is significant enough to 

require corrective action, (2) how much to invest in internal controls or

(3) the success of efforts implemented to reduce improper payments. In 

fiscal year 1998, VA piloted a new measurement system to determine the 

accuracy of veterans’ benefit payments—the Systematic Technical 

Accuracy Review (STAR) system. Using the STAR system, the Veterans 

Benefits Administration (VBA)—a component of VA—determined that its 

regional offices were accurate only 64 percent of the time when making 

initial benefit decisions. This measure indicated that VBA should focus 

additional attention on ensuring that correct decisions are made the first 

time. Using the 64 percent as a baseline, VBA established a goal of 

achieving a 93 percent accuracy rate by fiscal year 2004. Although it is too 

early to determine whether VBA’s efforts to meet its accuracy improvement 

goal will be successful, the new STAR system represents an important step 
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forward by VBA in identifying and correcting the causes of errors and 

having a baseline against which to measure results and progress. 

Currently, there is no governmentwide guidance on how to develop 

mechanisms for identifying and estimating improper payments, which 

would help agencies to identify whether a need exists to address improper 

payments in their annual strategic and performance planning processes. 

Developing such mechanisms would enable each agency’s management to 

better understand the full extent of its problem. With these mechanisms in 

place, appropriate cost-beneficial corrective actions could be designed and 

implemented.

Although no governmentwide guidance exists for identifying and 

estimating improper payments, the CFO and Results Acts provide a 

framework for OMB and agencies to report on efforts to minimize improper 

payments. Under the CFO Act, OMB is required to prepare and annually 

revise a governmentwide 5-year financial management plan and status 

report that discusses the activities the executive branch has undertaken to 

improve financial management in the federal government. Each agency 

CFO is responsible for developing annual agency-specific plans to support 

the governmentwide 5-year financial management plan. The CFO Act also 

requires OMB to provide the governmentwide 5-year plan and status report 

to appropriate congressional committees. This reporting process keeps the 

appropriate congressional committees informed of agencies’ efforts to 

improve accountability and stewardship over federal funds. 

As discussed earlier, under the Results Act, agencies are required to 

prepare strategic plans that identify goals and objectives at least every 3 

years. Complementing the strategic plans are annual performance plans 

that set annual goals with measurable target levels of performance, and 

annual performance reports that compare actual performance to the 

annual goals. The Results Act also requires that OMB annually prepare a 

governmentwide performance plan as a part of the President’s budget. The 

agency performance plans are the foundation for OMB’s governmentwide 

plan.

The framework afforded by the CFO and Results Acts suggests that 

agencies have a variety of mechanisms for reporting on improper 

payments, depending upon the magnitude or significance of those 
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payments. OMB calls57 for mission-critical management problems—those 

which prospectively and realistically threaten achievement of major 

program goals—to be discussed in agencies’ strategic plans and also in 

their annual performance plans under the Results Act. In our view, 

improper payments can reasonably be considered mission-critical 

problems for certain programs, including the 17 programs with reported 

improper payments discussed in this report. For example, for programs 

providing financial assistance benefits, such as the Food Stamp Program, 

maintaining integrity and accuracy in the payment of benefits is critical to 

the missions of the programs. For those agencies where these payments 

are not deemed mission critical, an appropriate vehicle for managing 

improper payments would be agency 5-year financial management plans 

developed under the auspices of the CFO Act, or other vehicles such as 

action plans. Figure 5 shows how the CFO and Results Acts provide a 

broad structure under which agencies can report the status of their efforts 

to reduce improper payments. 

57Preparation and Submission of Strategic Plans, Annual Performance Plans and Annual 

Program Performance Reports, OMB Circular A-11 Part 2, OMB/Executive Office of the 

President (Washington, D.C., July 1999).
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Figure 5: Reporting Improper Payments Within the Framework of the CFO and 

Results Acts

Note: The planning and reporting stages become iterative as management assesses the relative 

success of internal controls employed to minimize improper payments.

Source: GAO analysis of Results Act and CFO Act reporting requirements.

We evaluated the extent to which agencies that reported improper 

payments in their financial statement reports also addressed improper 

payments in their fiscal year 2000 performance plans. HHS, SSA, VA, and 

OPM are four agencies that comprehensively addressed improper 

payments using this framework. These agencies’ performance plans 

included both performance goals and strategies for minimizing improper 

Reporting Under CFO Act

Incorporate results and revised plan into

governmentwide Federal Financial

Management Status Report, financial

statement report, and 5-year financial

management plan or report as

appropriate for vehicle used.

Assess extent

of improper

payments

Planning Under CFO Act

Develop goals and strategies to

resolve improper payments in

agency's 5-year financial

management plan or other agencyspecific action plan.

Are improper

payments missioncritical management

problems?

No

No further reporting

under the Results

Act.

Yes

Planning Under Results Act

Address improper payments in the

agency strategic plan in consultation with

congressional oversight committees.

Develop goals and strategies to address

improper payments in agency's annual

performance plan.

Reporting Under Results Act

Report measures and results in agency's

annual performance report.
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payments for the Medicare Fee-for-Service, Old Age and Survivors 

Insurance, Veterans Benefits, and Federal Employees’ Life Insurance 

programs. As shown in figure 6, these programs represent 24 percent of 

those that reported improper payments or 61 percent of the total program 

dollars for the 17 programs. In contrast, 7 of the 17 programs (42 percent) 

did not or only cursorily addressed improper payments in their 

performance plans, and 34 percent addressed them in a moderate (i.e., less 

than comprehensive) manner. Some of the nine agencies we reviewed may 

have addressed these issues in their 5-year financial management, 

component, or other agency action plans. However, only HHS’ performance 

plan contained a reference or “pointer” to another plan that addressed 

improper payments. Because some agencies do not appear to be 

addressing improper payments in their performance plans, they may not 

consider the prevention of improper payments a priority or focus adequate 

attention on this issue. 

Figure 6: Degree to Which 17 Programs Addressed Improper Payments

Source: GAO analysis based on review of agency fiscal year 2000 performance plans.

Legend:

None: Agency performance plan does not address the issue of improper payments for this program.

Cursory: Agency performance plan addresses the need to minimize improper payments but does not 

provide any substantive performance goals or strategies to minimize improper payments in this 

program.

Moderate: Agency performance plan has either performance goals to address improper payments or 

strategies to minimize improper payments in this program, but not both, or lacks a comprehensive 

approach.

Comprehensive: Agency performance plan has performance goals and strategies that address key 

internal control weaknesses to minimize improper payments in this program.

Comprehensive

24%

Moderate

34%

Cursory

18%

None

24%
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OMB Circular A-11, Part 2, which serves as implementing guidance for 

agencies in preparing and submitting Results Act strategic and 

performance plans, states that agency plans should include goals for 

resolving mission-critical management problems. Circular A-11 also directs 

agencies to describe actions taken to address and resolve these issues in 

their performance plans by developing performance goals and discussing 

strategies. We have also advocated58 that agencies address mission-critical 

management problems, in their performance plans, by developing 

performance goals and discussing strategies.

Our analysis indicates that additional guidance on improper payments may 

be helpful to agency managers. Without an appropriate methodology in 

place for estimating and reporting improper payments, the Congress, 

agency managers, and the public are not aware of the full extent of this 

problem. As a result, agency managers cannot effectively use performance 

goals for managing improper payments.

Conclusions Although reported amounts of improper payments totaled $19.1 billion in 

fiscal year 1998, many agencies are not identifying, estimating, and 

reporting the nature and extent of improper payments. As a result, the 

magnitude is largely unknown. Based on previous audit reports, inadequate 

internal control and program design issues are the primary causes of 

improper payments for numerous federal programs. Compounding this 

problem, some agencies have not recognized the need to address and 

resolve mission-critical improper payment problems by discussing steps 

taken in their strategic plans and incorporating appropriate goals into their 

performance plans. 

Economic and demographic projections indicate that federal expenditures 

in certain programs will grow significantly. With billions of dollars at risk, 

agencies will need to continually and closely safeguard those resources 

entrusted to them and assign a high priority to reducing fraud, waste, and 

abuse. A first step for some agencies will involve developing mechanisms 

to identify, estimate, and report the nature and extent of improper 

payments annually. Without this fundamental knowledge, agencies cannot 

be fully informed about the magnitude, trends, and types of payment errors 

occurring within their programs. As a result, most agencies cannot make 

58Agency Performance Plans: Examples of Practices That Can Improve Usefulness to 

Decisionmakers (GAO/GGD/AIMD-99-69, February 26, 1999).
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informed cost-benefit decisions about strengthening their internal controls 

to minimize future improper payments or effectively develop goals and 

strategies to reduce them. Consulting with congressional oversight 

committees on the development of these goals and strategies is also 

important to obtaining consensus on how to address this multibillion dollar 

problem.

Recommendations To assist agencies in estimating and managing improper payments, we 

recommend that the Director of the Office of Management and Budget, 

through the Deputy Director for Management and OMB’s Office of Federal 

Financial Management, within the framework of the CFO and Results Acts:

• Develop and issue guidance to executive agencies to assist them in

(1) developing and implementing a methodology for annually estimating 

and reporting improper payments for major federal programs and

(2) developing goals and strategies to address improper payments in 

their annual performance plans.

• Require agencies to (1) include a description of steps being taken to 

address improper payments in their strategic and annual performance 

plans when the level of improper payments is mission critical and

(2) consult with congressional oversight committees, as appropriate, on 

the projected target levels and goals for estimating and reducing 

improper payments, as presented in the agencies’ annual performance 

plan.

OMB Comments and 

Our Evaluation

In commenting on a draft of this report, OMB agreed that its focus on 

improper payments should be expanded. OMB agreed with our first 

recommendation calling for guidance to assist agencies in developing and 

implementing a methodology for annually estimating and reporting 

improper payments for major federal programs and developing goals and 

strategies to address improper payments in their annual performance 

plans.

Regarding the first element of our second recommendation, OMB 

expressed concern that it may be inappropriate for agency strategic plans 

to always include a general goal or objective for reducing improper 

payments. OMB said it would expect agencies to include goals or 

objectives in their strategic plans if the level of improper payments was 

determined to be mission critical. We agree. As stated in our report, it was 
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not our intention that goals or objectives for reducing improper payments 

be universally included in agency strategic plans. Specifically, within the 

framework of the CFO and Results Acts, and as shown in figure 5, judgment 

needs to be exercised so that only mission-critical management problems 

are addressed in agency strategic and performance plans. To avoid any 

misconception regarding this issue, we have clarified our recommendation 

accordingly.

With regard to our recommendation to consult with the Congress on 

specific goals and targets for improper payments, OMB noted that 

congressional consultation is required by the Results Act and said that 

agencies interact with the Congress throughout the year as part of the 

normal appropriations and oversight processes. OMB stated that this level 

of interaction provides the opportunity for both the agency and the 

Congress to raise and discuss improper payment issues and should be 

adequate. In this regard, it will be important that these interactions take 

place. As discussed in our report, several agencies have not reported 

improper payments in their performance plans even when they could 

reasonably be considered mission critical. OMB’s comments are reprinted 

in appendix IV. OMB also provided informal technical comments, which we 

have incorporated as appropriate.

As agreed with your office, unless you publicly announce contents of this 

report earlier, we will not distribute it until 30 days from its date. Then, we 

will send copies to Senator Joseph Lieberman, Ranking Minority Member, 

Senate Committee on Governmental Affairs; Representative Dan Burton, 

Chairman, and Representative Henry A. Waxman, Ranking Minority 

Member, House Committee on Government Reform; Senator Pete V. 

Domenici, Chairman, and Senator Frank R. Lautenberg, Ranking Minority 

Member, Senate Committee on the Budget; Representative John R. Kasich, 

Chairman, and Representative John M. Spratt, Jr., Ranking Minority 

Member, House Committee on the Budget. We will also send copies to the 

Honorable Jacob J. Lew, Director of the Office of Management and Budget; 

the heads of the 24 CFO agencies; and respective agency CFOs and 

Inspectors General. Copies will also be made available to others upon 

request.
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This report was prepared under the direction of Gloria L. Jarmon, Director, 

Health, Education, and Human Services Accounting and Financial 

Management, who may be reached at (202) 512-4476 or by e-mail at 

jarmong.aimd@gao.gov if you or your staff have any questions. Staff 

contacts and other key contributors to this letter are listed in appendix V.

Sincerely yours,

Jeffrey C. Steinhoff

Acting Assistant Comptroller General

Accounting and Information Management Division
Page 45 GAO/AIMD-00-10 Improper Payments
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Appendix I

Executive Departments and Agencies Covered Apendxies

by the CFO Act ApendxiI

Department of Agriculture

Department of Commerce

Department of Defense

Department of Education

Department of Energy

Department of Health and Human Services

Department of Housing and Urban Development

Department of the Interior

Department of Justice

Department of Labor

Department of State

Department of Transportation

Department of the Treasury

Department of Veterans Affairs

Agency for International Development

Environmental Protection Agency

Federal Emergency Management Agency

General Services Administration

National Aeronautics and Space Administration

National Science Foundation

Nuclear Regulatory Commission

Office of Personnel Management

Small Business Administration

Social Security Administration
Page 47 GAO/AIMD-00-10 Improper Payments

Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements ApendxiI

Agency for 

International 

Development

The U.S. Agency for International Development (AID) was established in 

1961 pursuant to the Foreign Assistance Act of 1961. AID manages U.S. 

foreign economic and humanitarian assistance programs and helps 

countries recover from disaster, escape poverty, and become more 

democratic. AID’s mission is to contribute to U.S. national interests by 

supporting the people of developing and transitional countries in their 

efforts to achieve enduring economic and social progress and to participate 

more fully in resolving the problems of their countries and the world. In 

fiscal year 1998, AID’s total outlays for its various programs were

$5.2 billion.

Department of 

Agriculture

Federal Crop Insurance 

Corporation

The Federal Crop Insurance Program was established in 1938 by the 

Federal Crop Insurance Act to protect crop farmers from unavoidable risks 

associated with adverse weather, plant diseases, and insect infestations. 

The USDA Risk Management Agency administers the Federal Crop 

Insurance Program through the Federal Crop Insurance Corporation 

(FCIC), a government-owned corporation. The federal government retains 

a portion of the insurance risk for all policies and pays private insurance 

companies a fee that is intended to reimburse them for the reasonable 

expenses associated with selling and servicing crop insurance to farmers. 

In fiscal year 1998, FCIC had over 1 million crop insurance policies in force, 

with total premiums of $1.9 billion.

Food Stamp Program The Food Stamp Program (FSP), enacted by the Food Stamp Act of 1964, is 

the nation’s principal food assistance program. FSP enables low-income 

households to obtain a more nutritious diet by issuing monthly allotments 

of coupons or electronic benefits redeemable for food at retail stores. 

Eligibility and allotment amounts are based on household size and income 

as well as on assets, housing costs, work requirements, and other factors. 

In fiscal year 1998, 19.8 million individuals per month were provided food 

stamps for total annual program costs of $20.4 billion. 
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 48 GAO/AIMD-00-10 Improper Payments

Department of Health 

and Human Services −

Administration for 

Children and Families

The Administration for Children and Families (ACF), a division of the 

Department of Health and Human Services, is responsible for almost 50 

programs that promote the economic and social well being of families, 

children, individuals, and communities. Three programs do most of ACF’s 

spending: TANF, Foster Care, and Head Start.

TANF Temporary Assistance for Needy Families (TANF) block grants were 

created by the Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996 to replace the Aid to Families with Dependent 

Children (AFDC) Program. Specified goals of TANF include providing 

assistance to needy families and ending the dependence of needy parents 

on government benefits by promoting job preparation, work, and marriage. 

Over $16 billion in federal assistance is available to states each year 

through 2002 to fund the TANF program. While states have flexibility over 

the design and implementation of their welfare programs, they must 

impose several federal requirements, including work requirements and 

time limits on aid. 

Foster Care Foster Care was originally created in 1961 under title IV of the Social 

Security Act. The Foster Care Program is a permanently authorized 

entitlement program that provides matching funds to states for 

maintenance of eligible children in foster care homes, private nonprofit 

child care facilities, or public child care institutions. In fiscal year 1998, 

over half a million children were supported by the Foster Care Program 

with total federal outlays of $4.5 billion.

Head Start The Head Start Program was created in 1965 as part of the war on poverty 

to improve the social competence of children in low-income families. To 

support the social competence goal, Head Start programs deliver a broad 

range of services to children. These services include educational, medical, 

nutritional, mental health, dental, and social services. Head Start 

regulations require that at least 90 percent of the children enrolled in each 

program be from low-income families. ACF awards Head Start grants 

directly to local grantees who operate programs in all 50 states, the District 

of Columbia, Puerto Rico, and the U.S. territories. In fiscal year 1998, over 

800,000 children participated in Head Start programs, and federal outlays 

totaled $3.3 billion.
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 49 GAO/AIMD-00-10 Improper Payments

Department of Health 

and Human Services −

Health Care Financing 

Administration

Medicaid Medicaid, established in 1965 by Title XIX of the Social Security Act, is a 

federal-state matching entitlement program that pays for medical 

assistance for certain vulnerable and needy individuals and families with 

low incomes and resources. In 1998, it provided health care assistance to 33 

million persons, at a cost of about $98 billion to the federal government. 

The Health Care Financing Administration (HCFA) is responsible for the 

overall management of Medicaid; however, each state is responsible for 

managing its own program. Within broad federal statutory and regulatory 

guidelines, each state: (1) establishes its own eligibility standards,

(2) determines the types and range of services, (3) sets the rate of payment 

for services, and (4) administers its own program. 

Medicare Fee-for-Service Authorized by Title XVIII of the Social Security Act in 1965, Medicare is the 

nation’s largest health insurance program, covering an estimated 39.6 

million elderly and disabled at a cost of about $210 billion annually. The 

Medicare Program is administered by HCFA. While some beneficiaries 

participate in Medicare’s $33 billion Managed Care program, most receive 

their health care from the $177 billion Fee-for-Service portion of Medicare. 

HCFA contracts with over 40 insurance companies to process fee-forservice claims. Although contractors are the program’s front line of defense 

against fraud, abuse, and erroneous payments, HCFA is responsible for 

overseeing these contractors and for assuring that claims are paid 

accurately and efficiently. 
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 50 GAO/AIMD-00-10 Improper Payments

Department of Housing 

and Urban 

Development 

Housing Subsidy Programs Housing and Urban Development’s (HUD) Public Housing and Section 8 

programs were established by the U.S. Housing Act of 1937 and the 

Housing and Community Development Act of 1974 (revising Section 8 of 

the U.S. Housing Act of 1937), respectively. These programs help eligible 

low-income families obtain decent, safe, and sanitary housing by paying a 

portion of their rent.

HUD’s Public Housing Program is operated by approximately 3,200 public 

housing authorities (PHA), which operate under state and local laws and 

are funded by HUD. Public housing provides affordable shelter for lowincome families comprised of citizens or eligible immigrants. Through the 

operating subsidy program, HUD provides an annual subsidy to help PHAs 

pay some of the cost of operating and maintaining public housing units. In 

fiscal year 1998, more than 1.2 million public housing units were under 

management, with a net cost of about $3.1 billion. 

The Section 8 programs assist low-income families. Residents in subsidized 

units generally pay 30 percent of their income for rent, and HUD pays the 

balance. Section 8 has two assistance programs: project-based and tenantbased assistance. Tenant-based assistance is linked to specific individuals; 

the project-based assistance is linked to housing units. In fiscal year 1998, 

the Section 8 programs assisted approximately 3 million households and 

had net costs of $15.5 billion. 

Department of Labor 

Federal Employees’ 

Compensation Act

Enacted in 1916, the Federal Employees’ Compensation Act (FECA) 

provides workers’ compensation coverage to federal employees for workrelated injuries or disease. FECA, administered by the U.S. Department of 

Labor, authorizes the government to compensate federal employees when 

they are temporarily or permanently disabled due to injury or disease 

sustained while performing their duties. In fiscal year 1998, the Department 
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 51 GAO/AIMD-00-10 Improper Payments

of Labor received 165,000 federal injury reports and issued benefit 

payments of more than $1.9 billion. 

Unemployment Insurance Unemployment Insurance, enacted by Title IX of the Social Security Act of 

1935, as amended, is the nation’s response to the adverse effects of 

unemployment. The program’s mission is to provide unemployed workers 

with temporary income support and to facilitate re-employment. By doing 

so, the program helps stabilize the economy. In fiscal year 1998, over 7 

million unemployed workers received approximately $20 billion from the 

program.

The program is administered by the states through a network of local 

claims offices and central offices in each state. These offices also are 

responsible for the collection of taxes from all subject employers. The 

program is financed through collections of taxes from employers by both 

the federal and state governments. In addition, each state is responsible for 

determining eligibility requirements and levels of compensation, including 

the length of time benefits are paid. 

Office of Personnel 

Management

Federal Employees’ Health 

Benefits Program 

The Federal Employees’ Health Benefits Program (FEHBP) was 

established by the Federal Employees Health Benefits Act of 1959 for the 

purpose of making basic hospital and medical protection available to active 

federal employees, annuitants, and their families through plans offered by 

carriers participating in the FEHBP. In fiscal year 1998, there were

2.3 million federal civilian employees and 1.8 million annuitants enrolled in 

the FEHBP. In total, FEHBP covers about 9 million individuals. Annual 

premiums are over $16.3 billion, with the government paying up to 75 

percent of the premiums and employees paying the remaining portion.

Federal Employees’ Group 

Life Insurance Program

The Federal Employees’ Group Life Insurance (FEGLI) Program was 

established in 1954 by the Federal Employees’ Group Life Insurance Act to 

provide federal employees and annuitants with group term life insurance. 

The program is administered pursuant to a contract with a life insurance 
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 52 GAO/AIMD-00-10 Improper Payments

company. In fiscal year 1998, FEGLI covered 90 percent of eligible 

employees and annuitants, as well as many of their family members, and 

had $1.6 billion in net outlays. 

Retirement Program The Retirement Program is a defined benefit retirement plan and includes 

two components: (1) the Civil Service Retirement System (CSRS), created 

in 1920 by the Civil Service Retirement Act and (2) the Federal Employees’ 

Retirement System (FERS), established in 1986 by the Federal Employees’ 

Retirement System Act. CSRS is a stand-alone retirement plan intended to 

pay benefits for long-service federal employees. CSRS covers most federal 

employees hired before 1984 and is closed to new members. FERS covers 

most employees first hired after December 31, 1983, and provides benefits 

to the survivors of deceased FERS annuitants and employees. Using Social 

Security as a base, FERS provides an additional defined benefit and a 

voluntary thrift savings plan. OPM administers only the defined benefit 

component of FERS. In fiscal year 1998, OPM had over $43 billion in 

outlays, with over 2 million annuitants in CSRS, and approximately 100,000 

in FERS.

Social Security 

Administration

Old Age and Survivors 

Insurance

In 1935, the Social Security Act established a program to help protect aged 

Americans against the loss of income due to retirement. The 1939 

amendments added protection for survivors of deceased retirees by 

creating the Old Age and Survivors Insurance (OASI) Program. Employee 

and employer payroll tax contributions under the Federal Insurance 

Contributions Act (FICA) and the Self-Employment Contributions Act 

(SECA) finance this program. Administration of the program lies with the 

Social Security Administration (SSA). In fiscal year 1998, SSA directly 

disbursed $324 billion to approximately 38 million beneficiaries under this 

program.

Disability Insurance In 1956, the Social Security Act was amended to protect disabled workers 

against loss of income due to disability through creation of the Disability 

Insurance (DI) Program. In 1958, amendments to the act expanded benefits 
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 53 GAO/AIMD-00-10 Improper Payments

to include dependents of disabled workers. As a result, the DI Program 

provides a continuing income base for eligible workers who have qualifying 

disabilities and for eligible members of their families before those workers 

reach retirement age. As authorized by the act, workers are considered 

disabled if they have severe physical or mental conditions that prevent 

them from engaging in substantial gainful activity. The condition must be 

expected to last for a continuous period of at least 12 months or to result in 

death. Once DI beneficiaries reach age 65, they and their families are 

converted to the OASI Program. The DI Program is financed by employee 

and employer payroll tax contributions under FICA and SECA. SSA, using 

assistance from 54 state Disability Determination Services to make 

required medical and vocational decisions, is responsible for administering 

the DI Program. In fiscal year 1998, SSA disbursed approximately 

$48 billion in monthly cash payments to about 6 million beneficiaries.

Supplemental Security 

Income

In 1972, amendments to the Social Security Act established the 

Supplemental Security Income (SSI) Program. SSI provides cash assistance 

to financially needy individuals who are aged, blind, or disabled. General 

tax revenues finance this program. Many states supplement the federal SSI 

payment, choosing either to have SSA administer the supplement or to pay 

it directly. In fiscal year 1998, SSA disbursed approximately 

$27 billion in federal SSI payments to about 7 million recipients. Also, SSA 

disbursed approximately $3 billion in state supplemental payments during 

fiscal year 1998.

Department of the 

Treasury

Customs 

Drawbacks/Refunds

Refunds are payments made to importers/exporters for overpayments or 

duplicate payments of duties, taxes, and fees when goods are originally 

imported into the United States. A drawback is a refund of duties and/or 

excise taxes already paid to Customs on imported goods which were either 

(1) never entered into the commerce of the United States because they 

were either re-exported or destroyed under Customs’ supervision, or

(2) used (or substituted) in a process to manufacture articles which were 

exported from the United States or destroyed under Customs’ supervision 

without being used.
Appendix II

Agencies/Programs/Activities With Reported 

Improper Payments Included in the Agencies’ 

Fiscal Year 1998 Financial Statements

Page 54 GAO/AIMD-00-10 Improper Payments

The Congress initially passed legislation authorizing drawbacks in 1789, 

citing the need to facilitate American commerce and manufacturing. 

Drawback privileges are provided by the Tariff Act of 1930. The rationale 

for drawbacks has always been to encourage American commerce or 

manufacturing, or both. It permits the American manufacturer to compete 

in foreign markets without the handicap of including in the costs, and 

consequently in the sales price, the duty paid on imported merchandise. 

Drawbacks are generally processed in Customs’ port offices across the 

nation. In fiscal year 1998, net outlays related to drawbacks and refunds 

were over $1.3 billion.

Department of 

Veterans Affairs

In 1930, the Congress consolidated and coordinated various veterans’ 

programs with the establishment of the Veterans Administration. The 

Department of Veterans Affairs (VA) was established as a Cabinet level 

department in March 1989. VA’s mission is to administer the laws providing 

benefits and other services to veterans and their dependents and the 

beneficiaries of veterans. The Veterans Benefits Administration (VBA) 

administers VA’s nonmedical programs, which provide financial and other 

assistance to veterans, their dependents, and survivors. The compensation 

and pension (C&P) program is VBA’s largest, and in fiscal year 1998, VA 

paid approximately $20 billion in C&P benefits to more than 3 million 

veterans and their survivors.
Page 55 GAO/AIMD-00-10 Improper Payments
Page 56 GAO/AIMD-00-10 Improper Payments

Appendix III

Assessment of Performance Plans for Those 

Agencies Reporting Improper Payments ApendxiI

a

Although the agency performance plans did not include strategies for these programs, we assessed 

them as comprehensive because the related payment accuracy rates were 99.8 percent for both the 

Old Age Survivors Insurance and Life Insurance programs. Therefore, it may not be cost-beneficial for 

these agencies to design and implement additional strategies to mitigate improper payments. 

Source: GAO analysis based on a review of fiscal year 2000 agency performance plans.

Legend:

None: Agency performance plan does not address the issue of improper payments for this program.

Cursory: Agency performance plan addresses the need to minimize improper payments but does not 

provide any substantive performance goals or strategies to minimize improper payments in this 

program.

Department/agency Activity/program Degree to which the performance plan addresses improper 

payments

None Cursory Moderate Comprehensive

Agency for International 

Development

Not specifically identified X

Department of Agriculture Federal Crop Insurance 

Corporation

X

Department of Agriculture Food Stamp Program X

Department of Health and 

Human Services

Administration for Children and 

Families

X

Department of Health and 

Human Services

Medicaid X

Department of Health and 

Human Services

Medicare Fee-for-Service X

Department of Housing and 

Urban Development

Housing Subsidies X

Department of Labor Federal Employees' 

Compensation Act 

X

Department of Labor Unemployment Insurance X

Office of Personnel 

Management

Federal Employees' Health 

Benefits

X

Office of Personnel 

Management

Federal Employees' Group Life 

Insurance

Xa

Office of Personnel 

Management

Retirement X

Social Security Administration Disability Insurance X

Social Security Administration Old Age Survivors Insurance Xa

Social Security Administration Supplementary Security 

Income

X

Department of the Treasury Customs Drawbacks and 

Refunds

X

Department of Veterans 

Affairs

Veterans' Benefits X
Appendix III

Assessment of Performance Plans for Those 

Agencies Reporting Improper Payments

Page 57 GAO/AIMD-00-10 Improper Payments

Moderate: Agency performance plan has either performance goals to address improper payments or 

strategies to minimize improper payments in this program, but not both, or lacks a comprehensive 

approach.

Comprehensive: Agency performance plan has performance goals and strategies that address key 

internal controls to minimize improper payments in this program.
Page 58 GAO/AIMD-00-10 Improper Payments

Appendix IV

Comments From the Office of Management 

and Budget ApendxiI
Appendix IV

Comments From the Office of Management 

and Budget

Page 59 GAO/AIMD-00-10 Improper Payments
Page 60 GAO/AIMD-00-10 Improper Payments

Appendix V

GAO Contact and Staff Acknowledgements ApendxiIV

GAO Contact Debra Sebastian, (202) 512-9385

Acknowledgements Staff making key contributions to this report are Kwabena Ansong, Kay 

Daly, Margaret Davis, Marie Kinney, Meg Mills, and Ruth Sessions as well 

many other staff throughout GAO who contributed to selected sections of 

this report.
Page 61 GAO/AIMD-00-10 Improper Payments

Related GAO Products

The following lists prior GAO products dealing with improper payments, or 

overpayments dating back to fiscal year 1996, as requested by the 

Chairman.

Crop Insurance: USDA Needs a Better Estimate of Improper Payments to 

Strengthen Controls Over Claims (GAO/RCED-99-266, September 22, 1999).

Medicare: HCFA Oversight Allows Contractor Improprieties to Continue 

Undetected (GAO/T-HEHS/OSI-99-174, September 9, 1999).

Food Assistance: Efforts to Control Fraud and Abuse in the WIC Program 

Can Be Strengthened (GAO/RCED-99-224, August 30, 1999).

DOD Information Security: Serious Weaknesses Continue to Place Defense 

Operations at Risk (GAO/AIMD-99-107, August 26, 1999).

Defense Health Care: Claims Processing Improvements Are Under Way but 

Further Enhancements Are Needed (GAO/HEHS-99-128, August 23, 1999).

Medicare Fraud and Abuse: DOJ’s Implementation of False Claims Act 

Guidance in National Initiatives Varies (GAO/HEHS-99-170, August 6, 1999).

Defense Health Care: Improvements Needed to Reduce Vulnerability to 

Fraud and Abuse (GAO/HEHS-99-142, July 30, 1999).

Medicare Contractors: Despite Its Efforts, HCFA Cannot Ensure Their 

Effectiveness or Integrity (GAO/HEHS-99-115, July 14, 1999).

Medicare: HCFA Should Exercise Greater Oversight of Claims 

Administration Contractors (GAO/T-HEHS/OSI-99-167, July 14, 1999).

Department of Energy: Need to Address Longstanding Management 

Weaknesses (GAO/T-RCED-99-255, July 13, 1999).

Food Stamp Program: Households Collect Benefits for Persons 

Disqualified for Intentional Program Violations (GAO/RCED-99-180, July 8, 

1999).

Recovery Auditing: Reducing Overpayments, Achieving Accountability, and 

the Government Waste Corrections Act of 1999 (GAO/T-NSIAD-99-213, 

June 29, 1999).
Page 62 GAO/AIMD-00-10 Improper Payments

Food Stamp Program: Relatively Few Improper Benefits Provided to 

Individuals in Long-Term Care Facilities (GAO/RCED-99-151, June 4, 1999).

Medicare Subvention Demonstration: DOD Data Limitations May Require 

Adjustments and Raise Broader Concerns (GAO/HEHS-99-39, May 28, 

1999).

Medicare: Early Evidence of Compliance Program Effectiveness Is 

Inconclusive (GAO/HEHS-99-59, April 15, 1999).

Auditing the Nation’s Finances: Fiscal Year 1998 Results Highlight Major 

Issues Needing Resolution (GAO-T-AIMD-99-131, March 31, 1999).

Financial Audit: Fiscal Year 1998 Financial Report of the U.S. Government

(GAO/AIMD-99-130, March 31, 1999).

Contract Management: DOD is Examining Opportunities to Further Use 

Recovery Auditing (GAO/NSIAD-99-78, March 17, 1999).

Veterans’ Benefits Claims: Further Improvements Needed in ClaimsProcessing Accuracy (GAO/HEHS-99-35, March 1, 1999).

Medicare Managed Care: Better Risk Adjustment Expected to Reduce 

Excess Payments Overall While Making Them Fairer to Individual Plans 

(GAO/T-HEHS-99-72, February 25, 1999).

Direct Student Loans: Overpayments During the Department of Education’s 

Conversion to a New Payment System (GAO/HEHS-99-44R, February 17, 

1999).

HCFA Management: Agency Faces Multiple Challenges in Managing Its 

Transition to the 21st Century (GAO/T-HEHS-99-58, February 11, 1999).

Social Security: What the President’s Proposal Does and Does Not Do

(GAO/T-AIMD/HEHS-99-76, February 9, 1999).

Supplemental Security Income: Long-Standing Issues Require More Active 

Management and Program Oversight (GAO/T-HEHS-99-51, February 3, 

1999).
Page 63 GAO/AIMD-00-10 Improper Payments

Medicare Home Health Agencies: Role of Surety Bonds in Increasing 

Scrutiny and Reducing Overpayments (GAO/HEHS-99-23, January 29, 

1999).

Financial Management: Problems in Accounting for Navy Transactions 

Impair Funds Control and Financial Reporting (GAO/AIMD-99-19,

January 19, 1999).

Supplemental Security Income: Increased Receipt and Reporting of Child 

Support Could Reduce Payments (GAO/HEHS-99-11, January 12, 1999).

Internal Controls: Reporting Air Force Vendor Payment System 

Weaknesses Under the Federal Managers’ Financial Integrity Act

(GAO/AIMD-99-33R, December 21, 1998).

Contract Management: Recovery Auditing Offers Potential to Identify 

Overpayments (GAO/NSIAD-99-12, December 3, 1998).

Student Loans: Improvements in the Direct Loan Consolidation Process

(GAO/HEHS-99-19R, November 10, 1998).

Internal Revenue Service: Immediate and Long-Term Actions Needed to 

Improve Financial Management (GAO/AIMD-99-16, October 30, 1998).

DOD Procurement Fraud: Fraud by an Air Force Contracting Official

(GAO/OSI-98-15, September 23, 1998).

Year 2000 Computing Crisis: Progress Made at Department of Labor, But 

Key Systems at Risk (GAO/T-AIMD-98-303, September 17, 1998).

Fraud, Waste, and Abuse: The Cost of Mismanagement (GAO/AIMD98-265R, September 14, 1998).

Supplemental Security Income: Action Needed on Long-Standing Problems 

Affecting Program Integrity (GAO/HEHS-98-158, September 14, 1998).

Welfare Reform: Early Fiscal Effects of the TANF Block Grant (GAO/AIMD98-137, August 18, 1998).

Food Assistance: Computerized Information Matching Could Reduce Fraud 

and Abuse in the Food Stamp Program (GAO/T-RCED-98-254, August 5, 

1998).
Page 64 GAO/AIMD-00-10 Improper Payments

Earned Income Credit: IRS’ Tax Year 1994 Compliance Study and Recent 

Efforts to Reduce Noncompliance (GAO/GGD-98-150, July 28, 1998).

Section 8 Project-Based Rental Assistance: HUD’s Processes for Evaluating 

and Using Unexpended Balances Are Ineffective (GAO/RCED-98-202, July 

22, 1998).

Medicare: Application of the False Claims Act to Hospital Billing Practices

(GAO/HEHS-98-195, July 10, 1998). 

Welfare Reform: States Are Restructuring Programs to Reduce Welfare 

Dependence (GAO/HEHS-98-109, June 17, 1998).

Head Start: Challenges Faced in Demonstrating Program Results and 

Responding to Societal Changes (GAO/T-HEHS-98-183, June 9, 1998).

Medicare: Health Care Fraud and Abuse Control Program Financial Report 

for Fiscal Year 1997 (GAO/AIMD-98-157, June 1, 1998).

Medicare Billing: Commercial System Will Allow HCFA to Save Money, 

Combat Fraud and Abuse (GAO/T-AIMD-98-166, May 19, 1998).

Computer Security: Pervasive, Serious Weaknesses Jeopardize State 

Department Operations (GAO/AIMD-98-145, May 18, 1998).

Medicare: Need to Overhaul Costly Payment System for Medical 

Equipment and Supplies (GAO/HEHS-98-102, May 12, 1998).

Social Security: Better Payment Controls for Benefit Reduction Provisions 

Could Save Millions (GAO/HEHS-98-76, April 30, 1998).

Food Assistance: Observations on Reducing Fraud and Abuse in the Food 

Stamp Program (GAO/T-RCED-98-167, April 23, 1998).

Direct Student Loans: Efforts to Resolve Lender’s Problems With 

Consolidations are Under Way (GAO/HEHS-98-103, April 21, 1998).

Supplemental Security Income: Organizational Culture and Management 

Inattention Place Program at Continued Risk (GAO/T-HEHS-98-146, 

April 21, 1998).
Page 65 GAO/AIMD-00-10 Improper Payments

Department of Defense: Financial Audits Highlight Continuing Challenges 

to Correct Serious Financial Management Problems (GAO/T-AIMD/NSIAD98-158, April 16, 1998).

Medicare Billing: Commercial Systems Could Save Hundreds of Millions 

Annually (GAO/AIMD-98-91, April 15, 1998).

Internal Control: Essential for Safeguarding Assets, Compliance with Laws 

and Regulations, and Reliable Financial Reporting (GAO/T-AIMD-98-125, 

April 1, 1998). 

Financial Audit: 1997 Consolidated Financial Statements of the United 

States Government (GAO/AIMD-98-127, March 31, 1998).

Head Start Programs: Participant Characteristics, Services, and Funding

(GAO/HEHS-98-65, March 31, 1998).

Supplemental Security Income: Opportunities Exist for Improving Payment

Accuracy (GAO/HEHS-98-75, March 27, 1998).

Food Stamp Program: Information on Trafficking Food Stamp Benefits

(GAO/RCED-98-77, March 26, 1998).

Medicare Home Health Benefit: Congressional and HCFA Actions Begin to 

Address Chronic Oversight Weaknesses (GAO/T-HEHS-98-117, March 19, 

1998).

CFO Act Financial Audits: Programmatic and Budgetary Implications of 

Navy Financial Data Deficiencies (GAO/AIMD-98-56, March 16, 1998).

Medicare: HCFA Can Improve Methods for Revising Physician Practice 

Expense Payments (GAO/HEHS-98-79, February 27, 1998).

Financial Audit: Examination of IRS’ Fiscal Year 1997 Custodial Financial 

Statements (GAO/AIMD-98-77, February 26, 1998).

Medicaid: Early Implications of Welfare Reform for Beneficiaries and 

States (GAO/HEHS-98-62, February 24, 1998).

Food Stamp Overpayments: Thousands of Deceased Individuals Are Being 

Counted as Household Members (GAO/RCED-98-53, February 11, 1998).
Page 66 GAO/AIMD-00-10 Improper Payments

Financial Management: Seven DOD Initiatives That Affect the Contract 

Payment Process (GAO/AIMD-98-40, January 30, 1998).

Managing for Results: The Statutory Framework for Performance-Based 

Management and Accountability (GAO/GGD/AIMD-98-52, January 28, 

1998).

Illegal Aliens: Extent of Welfare Benefits Received on Behalf of U.S. Citizen 

Children (GAO/HEHS-98-30, November 19, 1997).

Inspectors General: Contracting Actions By Treasury Office of Inspector 

General (GAO/OSI-98-1, October 31, 1997).

Food Assistance: Reducing Food Stamp Benefit Overpayments and 

Trafficking (GAO/T-RCED-98-37, October 30, 1997).

DOD Procurement: Funds Returned by Defense Contractors (GAO/NSIAD98-46R, October 28, 1997).

Medicare Home Health: Differences in Service Use by HMO and Fee-forService Providers (GAO/HEHS-98-8, October 21, 1997).

Disaster Assistance: Guidance Needed for FEMA’s “Fast Track” Housing 

Assistance Process (GAO/RCED-98-1, October 17, 1997).

VA Medical Care: Increasing Recoveries From Private Health Insurers Will 

Prove Difficult (GAO/HEHS-98-4, October 17, 1997).

Medicare: Recent Legislation to Minimize Fraud and Abuse Requires 

Effective Implementation (GAO/T-HEHS-98-9, October 9, 1997).

Budget Issues: Budgeting For Federal Insurance Programs (GAO/AIMD97-16, September 30, 1997).

Medicare Automated Systems: Weaknesses in Managing Information 

Technology Hinder Fight Against Fraud and Abuse (GAO/T-AIMD-97-176, 

September 29, 1997).

Food Assistance: A Variety of Practices May Lower the Costs of WIC

(GAO/RCED-97-225, September 17, 1997).
Page 67 GAO/AIMD-00-10 Improper Payments

Medicare: Control Over Fraud and Abuse Remains Elusive (GAO/T-HEHS97-165, June 26, 1997).

Supplemental Security Income: Timely Data Could Prevent Millions in 

Overpayments to Nursing Home Residents (GAO/HEHS-97-62, June 3, 

1997).

DOD High-Risk Areas: Eliminating Underlying Causes Will Avoid Billions of 

Dollars in Waste (GAO/T-NSIAD/AIMD-97-143, May 1, 1997).

Financial Management: Improved Reporting Needed for DOD Problem 

Disbursements (GAO/AIMD-97-59, May 1, 1997).

Medicare HMOs: HCFA Can Promptly Eliminate Hundreds of Millions in 

Excess Payments (GAO/HEHS-97-16, April 25, 1997).

Social Security Disability: SSA Actions to Reduce Backlogs and Achieve 

More Consistent Decisions Deserve High Priority (GAO/T-HEHS-97-118, 

April 24, 1997).

Crop Insurance: Opportunities Exist to Reduce Government Costs for 

Private-Sector Delivery (GAO/RCED-97-70, April 17, 1997).

Nursing Homes: Too Early to Assess New Efforts to Control Fraud and 

Abuse (GAO/T-HEHS-97-114, April 16, 1997).

Contract Management: Fixing DOD’s Payment Problems Is Imperative

(GAO/NSIAD-97-37, April 10, 1997).

Financial Management: Improved Management Needed for DOD 

Disbursement Process Reforms (GAO/AIMD-97-45, March 31, 1997).

Medicaid Fraud and Abuse: Stronger Action Needed to Remove Excluded 

Providers From Federal Health Programs (GAO/HEHS-97-63, March 31, 

1997).

Department of Veterans Affairs: Programmatic and Management 

Challenges Facing the Department (GAO/T-HEHS-97-97, March 18, 1997).

Social Security: Disability Programs Lag in Promoting Return to Work

(GAO/HEHS-97-46, March 17, 1997).
Page 68 GAO/AIMD-00-10 Improper Payments

Food Stamps: Substantial Overpayments Result From Prisoners Counted 

as Household Members (GAO/RCED-97-54, March 10, 1997).

Farm Programs: Finality Rule Should Be Eliminated (GAO/RCED-97-46, 

March 7, 1997).

High-Risk Areas: Benefits to Be Gained by Continued Emphasis on 

Addressing High-Risk Areas (GAO/T-AIMD-97-54, March 4, 1997).

Supplemental Security Income: Long-Standing Problems Put Program at 

Risk for Fraud, Waste and Abuse (GAO/T-HEHS-97-88, March 4, 1997).

Medicare HMOs: HCFA Could Promptly Reduce Excess Payments by 

Improving Accuracy of County Payment Rates (GAO-T-HEHS-97-82, 

February 27, 1997).

Benefit Fraud With Post Office Boxes (GAO/HEHS-97-54R, February 21, 

1997).

Ex-Im Bank’s Retention Allowance Program (GAO/GGD-97-37R, 

February 19, 1997).

High-Risk Series (GAO/GGD-97-37R, February 1997).

SSA Disability Redesign: Focus Needed on Initiatives Most Crucial to 

Reducing Costs and Time (GAO/HEHS-97-20, December 20, 1996).

Medicaid: States’ Efforts to Educate and Enroll Beneficiaries in Managed 

Care (GAO/HEHS-96-184, September 17, 1996).

Supplemental Security Income: SSA Efforts Fall Short in Correcting 

Erroneous Payments to Prisoners (GAO/HEHS-96-152, August 30, 1996).

Supplemental Security Income: Administrative and Program Savings 

Possible by Directly Accessing State Data (GAO/HEHS-96-163, August 29, 

1996).

Unemployment Insurance: Millions in Benefits Overpaid to Military 

Reservists (GAO/HEHS-96-101, August 5, 1996).

Department of Education: Status of Actions to Improve the Management of 

Student Financial Aid (GAO/HEHS-96-143, July 12, 1996).
Page 69 GAO/AIMD-00-10 Improper Payments

Executive Guide: Effectively Implementing the Government Performance 

and Results Act (GAO/GGD-96-118, June 1996).

Health Care Fraud: Information-Sharing Proposals to Improve 

Enforcement Efforts (GAO/GGD-96-101, May 1, 1996).

SSA Overpayment Recovery (GAO/HEHS-96-104R, April 30, 1996).

Social Security: Issues Involving Benefit Equity for Working Women

(GAO/HEHS-96-55, April 10, 1996).

Fraud and Abuse: Providers Target Medicare Patients in Nursing Facilities

(GAO/HEHS-96-18, January 24, 1996).

Unsubstantiated DOE Travel Payments (GAO/RCED-96-58R, December 28, 

1995).

Financial Management: Challenges Facing DOD in Meeting the Goals of the 

Chief Financial Officers Act (GAO/T-AIMD-96-1, November 14, 1995).

Fraud and Abuse: Medicare Continues to Be Vulnerable to Exploitation by 

Unscrupulous Providers (GAO/T-HEHS-96-7, November 2, 1995).

DOD Procurement: Millions in Contract Payment Errors Not Detected and 

Resolved Promptly (GAO/NSIAD-96-8, October 6, 1995).

Medicare: Excessive Payments for Medical Supplies Continue Despite 

Improvements (GAO/T-HEHS-96-5, October 2, 1995).

(916282) Letr
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