U.S. RAILROAD RETIREMENT BOARD

OFFICE OF INSPECTOR GENERAL 

Audit of Railroad Retirement 

Board’s Compliance with 

Improper Payments Reporting 

in the Fiscal Year 2019 

Performance and 

Accountability Report

Report No. 20-06 May 12, 2020
OFFICE OF INSPECTOR GENERAL

U.S. RAILROAD RETIREMENT BOARD

Audit of Railroad Retirement Board’s Compliance with Improper 

Payments Reporting in the Fiscal Year 2019 Performance and 

Accountability Report

Report Summary May 12, 2020 Report No. 20-06

What We Found 

The Railroad Retirement Board (RRB) was not compliant with 

the Improper Payments Elimination and Recovery Act of 2010 

(IPERA) because it did not satisfy four of six payment integrity 

reporting requirements. This occurred because the RRB did not 

publish payment integrity information or improper payment 

data for Railroad Medicare.

We further determined that (1) the agency’s payment integrity 

reporting was incomplete and therefore inaccurate; (2) RRB’s 

performance in reducing Railroad Medicare improper payments 

was inadequate and some of the RRB’s recapture program 

information needed improvement; (3) some of RRB’s additional 

reporting requirements pertaining to improper payment 

barriers and accountability, information systems and other 

infrastructure, and relief from annual reporting request were 

missing; and (4) the timeliness of improper payment data and

sampling and estimation plans could be improved.

What We Recommend

To address the exceptions in this audit, we made five

recommendations related to IPERA compliance, action plans to 

reduce improper payments, reconciliation of data, and 

resuming Railroad Medicare reporting.

RRB management concurred with one of the five

recommendations. RRB’s position was that the Centers for 

Medicare and Medicaid Services (CMS) was responsible for the 

Medicare program as a whole, the RRB’s Medicare 

responsibilities were limited overall, and if RRB published 

Railroad Medicare payment integrity information it would have 

resulted in duplicative reporting. We disagreed with this 

position and continue to see the need for our recommendations 

as explained throughout this report.

What We Did 

Section 3(b) of IPERA requires each 

agency’s Inspector General to

assess compliance for each fiscal 

year. Our audit procedures 

included identification of criteria;

assessment of the accuracy and 

completeness of agency reporting; 

assessment of the RRB's sampling 

plan, accompanying material, and 

related postings; and coordination 

efforts with CMS to determine if 

Railroad Medicare payment 

integrity information and improper 

payment data was reported in the 

U.S. Department of Health and 

Human Services’ fiscal year 2019 

Agency Financial Report.

The mandated objectives of this 

audit were to

 determine whether the RRB is 

in compliance with IPERA;

 evaluate the accuracy and 

completeness of improper 

payment reporting; and

 evaluate agency performance 

in reducing and recapturing 

improper payments.

The scope of the audit was 

improper payment data reported 

in the RRB’s fiscal year 2019

Performance and Accountability 

Report.
OFFICE OF INSPECTOR GENERAL – U.S. RAILROAD RETIREMENT BOARD 

Contents

INTRODUCTION 1

OBJECTIVES, SCOPE, AND METHODOLOGY 1

BACKGROUND 2

RAILROAD MEDICARE, PAYMENT INTEGRITY REPORTING, AND IMPROPER PAYMENT DATA 5

RESULTS OF AUDIT 7

PAYMENT INTEGRITY REPORTING REQUIRED IN STATUTE 8

REQUIREMENT #1 – RRB PUBLISHED A PERFORMANCE AND ACCOUNTABILITY REPORT 8

REQUIREMENT #2 – RRB WAS NOT REQUIRED TO CONDUCT RISK ASSESSMENTS 9

REQUIREMENTS #3 THROUGH #6 – RRB DID NOT PUBLISH AN IP ESTIMATE, A 

CORRECTIVE ACTION PLAN, A REDUCTION TARGET, OR IP RATE OF LESS THAN 10

PERCENT FOR RAILROAD MEDICARE 9

RECOMMENDATION 11

MANAGEMENT’S COMMENTS AND OUR RESPONSE 11

RRB’S PAYMENT INTEGRITY REPORTING WAS INCOMPLETE AND INACCURATE 14

AGENCY PERFORMANCE IN REDUCING AND RECAPTURING IMPROPER PAYMENTS NEEDS 

IMPROVEMENT 14

RRB’S IMPROPER PAYMENT REDUCTION EFFORTS FOR RAILROAD MEDICARE WERE 

INEFFECTIVE 14

INSUFFICIENT INFORMATION WAS PROVIDED FOR RAILROAD MEDICARE’S RECAPTURE 

PROGRAM, UNCOLLECTIBLE AMOUNTS, AND THE DO NOT PAY INITIATIVE 15

RAILROAD RETIREMENT ACT AND RAILROAD UNEMPLOYMENT INSURANCE ACT 

RECAPTURE PROGRAMS COULD BE IMPROVED 15

RECOMMENDATIONS 17

MANAGEMENT’S COMMENTS AND OUR RESPONSE 17

ADDITIONAL REPORTING REQUIRED IN STATUTE 18

INFORMATION ON RAILROAD MEDICARE IMPROPER PAYMENT BARRIERS,

ACCOUNTABILITY, INFORMATION SYSTEMS, AND OTHER INFRASTRUCTURE WAS MISSING 18

RRB IMPROPERLY CEASED PAYMENT INTEGRITY REPORTING FOR ITS RAILROAD 

MEDICARE PROGRAM 18

RRB DID NOT REPORT A HIGH PRIORITY PROGRAM 19

RECOMMENDATION 20

MANAGEMENT’S COMMENTS AND OUR RESPONSE 20
OFFICE OF INSPECTOR GENERAL – U.S. RAILROAD RETIREMENT BOARD 

OTHER OBSERVATIONS 20

RAILROAD MEDICARE PAYMENT INTEGRITY REPORTING AND IMPROPER PAYMENT DATA 

IS NOT TRANSPARENT IN HHS’ FISCAL YEAR 2019 AGENCY FINANCIAL REPORT 20

THE SAMPLING AND ESTIMATION PLAN WAS NOT OPTIMAL 21

APPENDIX I: MANAGEMENT COMMENTS 23

APPENDIX II: MANAGEMENT COMMENTS 27

APPENDIX III: PREVIOUS OFFICE OF INSPECTOR GENERAL OPEN AUDIT RECOMMENDATIONS FOR IMPROPER 

PAYMENT REPORTING 28

APPENDIX IV: ABBREVIATIONS 32

LIST OF TABLES

TABLE 1. RRB’S TIMELINE FOR COMPLIANCE WITH IMPROPER PAYMENT LAWS 4

TABLE 2. ASSESSMENT OF RRB’S COMPLIANCE WITH IPERA 7

TABLE 3. OVERPAYMENTS RECAPTURED OUTSIDE OF PAYMENT RECAPTURE AUDITS 16
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 1

INTRODUCTION

This report presents the results of the Office of Inspector General’s (OIG) audit of the Railroad 

Retirement Board’s (RRB) fiscal year 2019 compliance with the Improper Payments Elimination 

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

Improvement Act of 2012 (IPERIA), which both amended the Improper Payments Information 

Act of 2002.1

Objectives, Scope, and Methodology

The mandated objectives of this audit were to

 determine whether the RRB is in compliance with IPERA;

 evaluate the accuracy and completeness of improper payment reporting; and

 evaluate agency performance in reducing and recapturing improper payments.

The scope of this audit was the information published in the RRB’s Payment Integrity section of 

its fiscal year 2019 Performance and Accountability Report (PAR). Payment integrity 

information and improper payment data reported in the PAR consisted of fiscal years 2017 and 

2018 overpayments recaptured outside of payment recapture audits for the RRB’s Railroad 

Retirement Act (RRA) and Railroad Unemployment Insurance Act (RUIA) programs. The RRB did 

not report improper payment data on its Railroad Medicare program, vendor payments, or 

employee payments. The RRB provided narrative discussing why they did not report on those 

respective programs.

To accomplish the audit objectives, we

 identified criteria from the law as well as Office of Management and Budget’s (OMB)

governmentwide guidance for IPERA;

 identified and reviewed RRB internal guidance, policies, and procedures for PAR 

reporting;

 reviewed the RRB's payment integrity section as provided in the fiscal year 2019 PAR, 

accompanying material, and related postings;

 requested and reviewed source data and documentation from the agency to support 

the information in the PAR; 

 assessed the accuracy and completeness of agency reporting;

 evaluated the agency’s performance in reducing and recapturing improper payments;

 1 Pub. L. No. 111-204, 124 Stat. 2224 (2010), Pub. L. No. 112-248, 126 Stat. 2390 (2013), 

Pub. L. No. 107-300, 116 Stat. 2350 (2002).
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 2

 interviewed appropriate RRB officials and agency staff;

 coordinated with key individuals from the U.S. Department of Health and Human 

Services’ (HHS) Centers for Medicare and Medicaid Services (CMS) to obtain evidence 

that Railroad Medicare improper payment estimate was reported in HHS’ Agency 

Financial Report (AFR);

 reviewed appropriate CMS documentation; and

 reviewed agency documentation.

We assessed the data reliability of payment recapture data and overpayment recoveries

obtained from RRB’s debt recovery section by (1) comparing data from the computer generated 

spreadsheets to the Financial Management Integrated System (FMIS) and Treasury Report on 

Receivables (TROR), (2) verifying underlying calculations, (3) verifying the accuracy of the 

filtered accounts receivable records, and (4) interviewing agency officials knowledgeable about 

FMIS and TROR. We determined the data from the debt recovery section was sufficiently 

reliable for the purposes of this audit.

Our review of internal controls were limited to those necessary to address the objectives and 

scope of the audit. For example, we used the Council of the Inspectors General on Integrity and 

Efficiency’s Guidance for Improper Payments Elimination and Recovery Act Compliance Reviews, 

Part III, Section B of Appendix C to OMB Circular No. A-123, Requirements for Payment Integrity 

Improvement, OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk 

Management and Internal Control to conduct our evaluation of the RRB’s internal control over 

payment integrity and OMB Circular No. A-136, Financial Reporting Requirements.

2

We conducted this performance audit in accordance with generally accepted government 

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

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.

We conducted our fieldwork at RRB headquarters in Chicago, Illinois from December 2019

through April 2020.

Background

The RRB, an independent agency in the executive branch of the Federal Government, 

administers retirement and survivor and unemployment and sickness insurance benefit 

programs for railroad workers and their families under the RRA and RUIA. The RRB paid 

$13.1 billion in retirement and survivor benefits and $93.2 million in unemployment and 

 2 Council of the Inspectors General on Integrity and Efficiency, Guidance for Improper Payments Elimination and 

Recovery Act Compliance Reviews (Washington, D.C.: July 9, 2019); Office of Management and Budget (OMB)

Appendix C to Circular No. A-123, Requirements for Payment Integrity Improvement, M-18-20 (Washington, D.C.: 

June 26, 2018); OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and 

Internal Control, M-16-17 (Washington, D.C.: July 15, 2016); and OMB Circular No. A-136, Financial Reporting 

Requirements (Washington, D.C.: June 28, 2019).
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 3

sickness insurance benefits during fiscal year 2019. The RRB also administers aspects of the 

Medicare program (Railroad Medicare) under the Social Security Act.3 The RRB, through its 

contractor, paid $832.4 million in Railroad Medicare Part B claims on behalf of its beneficiaries 

from October 1, 2018 through September 30, 2019.

Improper payment legislation was enacted to reduce improper payments and directed OMB to 

issue governmentwide guidance regarding reporting requirements. IPERA defines an improper 

payment as any payment that should not have been made or that was made in an incorrect 

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

administrative, or other legally applicable requirements. An improper payment includes any 

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

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

authorized by law).4

The primary criteria derived from federal improper payment laws were

 OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management 

and Internal Control (OMB M-16-17);5

 Appendix C to OMB Circular No. A-123, Requirements for Payment Integrity 

Improvement (OMB M-18-20); and6

 OMB Circular No. A-136, Financial Reporting Requirements.

7

OMB M-18-20 defined significant improper payments “...as gross annual improper payments 

(i.e., the total amount of overpayments and underpayments) in the program exceeding (1) both 

1.5 percent of program outlays and $10,000,000 of all program or activity payments made 

during the fiscal year reported or (2) $100,000,000 (regardless of the improper payment 

percentage of total program outlays).”8 The guidance also required agencies to approach 

improper payments with an Enterprise Risk Management (ERM) framework in mind and link 

agency efforts in establishing internal controls and preventing improper payments. According 

to OMB M-18-20,

... [ERM] framework can be used to assist in the management of payment integrity 

risk. Management is required to manage their payment integrity risk to an agency 

achieving its strategic, operations, reporting, or compliance objectives. While the 

extent of this may differ among agencies, ensuring the integrity of federal payments

is fundamental to the core mission for agencies. 

 3 42 U.S.C. § 1842(g). The portion of Medicare the Railroad Retirement Board (RRB) is responsible for is commonly 

known as Railroad Medicare. The term can be found on Google and throughout Palmetto GBA’s website. 4 Pub. L. No. 111-204, 124 Stat. 2224 (2010), Pub. L. No. 112-248, 126 Stat. 2390 (2013), and

Pub. L. No. 107-300, 116 Stat. 2350 (2002). 5 OMB M-16-17. 6 OMB M-18-20. 7 OMB Circular A-136. 8 Also known as “programs and activities identified under section 2(c) of the Improper Payments Act of 2002” per 

31 U.S.C. § 3321.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 4

Part of an ERM model is the extended enterprise. According to OMB M-16-17 and

OMB M-18-20, the extended enterprise consists of interdependent relationships, parent-child 

relationships, and relationships external to an agency. Thus, no agency is self-contained. In the 

context of ERM and the management of payment integrity risk, the extended enterprise 

includes state, local governments, other departments and agencies, or third party service 

providers. Although agency’s have less control, they still maintain responsibility for managing 

risk to payment integrity that comes from the extended enterprise. Despite having little or no 

control, agencies retain the responsibility for the management of payment integrity risk that 

comes from the greater risk environment.

OMB guidance requires each agency’s Inspector General (IG) to assess IPERA compliance and 

submit its final report by May 15th of the following year after the issuance of the agency’s PAR.9

Agencies that are noncompliant with IPERA are subject to additional reporting requirements. 

Noncompliance for one year requires that the agency submit a plan describing the actions to be 

taken to become compliant. Noncompliance for two consecutive fiscal years for the same 

program requires a review from OMB to determine if additional funding would help the agency 

become compliant.

Within the RRB, the Office of Programs compiles and reports improper payment data for the 

annual PAR. Table 1 shows fiscal year 2019 reporting and the expected timeline for publishing

the next improper payment estimate or conducting a risk assessment for the RRB’s benefit and 

non-benefit programs, if applicable.

Table 1. RRB’s Timeline for Compliance with Improper Payment Laws

Program

Fiscal Year 2019 

Reporting

Next Expected 

Reporting Cycle What is Expected?

RRA Did Not Report FY 2020 PAR Conduct a Risk Assessment

RUIA Did Not Report FY 2020 PAR Conduct a Risk Assessment

Railroad 

Medicare

Did Not Report FY 2020 PAR Publish:

- an Improper Payment Estimate

- a Corrective Action Plan

- and Meet a Reduction Target

- an Improper Payment Rate of 

Less than 10 Percent

Vendor 

Payments

Did Not Report FY 2020 PAR Conduct a Risk Assessment

Employee 

Payments

Did Not Report FY 2020 PAR Conduct a Risk Assessment

Source: Railroad Retirement Board (RRB) Office of Inspector General (OIG) analysis of RRB agency reporting from 

fiscal year 2017 through fiscal year 2019. 

Note: In July 2018, OMB granted the RRB reporting relief for the RRA and RUIA programs. The RRB ceased reporting Railroad 

Medicare improper payment data beginning in fiscal year 2019. Vendor and Employee payments were not considered 

susceptible to improper payments.

 9 OMB M-18-20.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 5

Railroad Medicare, Payment Integrity Reporting, and Improper Payment Data

At the end of fiscal year 2019, approximately 455,000 qualified railroad beneficiaries were 

enrolled in the RRB’s administered portion of Medicare Part B. During fiscal year 2019, the RRB 

contracted with a Specialty Medicare Administrative Contractor (Palmetto, GBA) and 

administered certain provisions of the Medicare program.

10 These provisions included eligibility 

determination, enrollment or removal from enrollment, premium collection, processing state 

buy-ins, processing arrearages and refunds, paying Canadian Part A claims, liaison work with 

Palmetto, quality assurance and oversight of Palmetto, records maintenance, and answering 

inquiries. According to the RRB, these costs were offset by approximately $32 million in 

reimbursements from CMS.11

As such, CMS has continued to pay the RRB for these administrative services through an 

existing and ongoing cost reimbursement agreement. CMS has paid the RRB approximately 

$97 million to administer the Railroad Medicare program (fiscal years 2013 through 2019). This

$97 million covered both direct and indirect costs for the RRB and the RRB OIG. During this 

same timeframe, CMS paid the RRB an additional $120 million for its Palmetto contract. This 

resulted in a separate Railroad Medicare program costing taxpayers $217 million over seven 

years. 

With respect to the RRB’s Railroad Medicare program, payment integrity reporting, and 

improper payment data, the RRB maintained an extended enterprise relationship with CMS and 

the RRB’s SMAC, Palmetto. At the time of this audit, the governing documents between RRB, 

CMS, and Palmetto were the

 Interagency Agreement between HHS (CMS) and RRB, dated April 19, 1991, signed by 

the Health Care Finance Administration’s (now CMS) Director of Office of Budget and 

Administration on April 16, 1991 and by RRB’s Chief Executive Officer on 

March 22, 1991; 

 Addendum to the Interagency Agreement between HHS (CMS) and RRB, dated 

July 26, 2004, signed by CMS’ Director of Office of Financial Management on 

July 23, 2004 and by RRB’s Senior Executive Officer on July 30, 2004; 

 Memorandum of Understanding between CMS and RRB (MOU13-61), signed by CMS’ 

Deputy Center Director of the Center for Medicare on April 11, 2013 and by RRB’s 

Director of Administration and Senior Procurement Executive on April 12, 2013; and

 RRB’s Palmetto contract – RRB12C011 and corresponding statement of work. The SMAC 

contract was signed by Palmetto’s President on November 26, 2012 and by RRB’s Chief 

of Acquisition Management and Contracting Officer on November 27, 2012.

 10 As part of its administrative responsibilities, the RRB selected a Specialty Medicare Administrative Contractor 

(SMAC) to process Railroad Medicare claims nationwide and administered the contract with the carrier, 

Palmetto GBA. The contracting officer, contracting officer representative, and the contracting team are all RRB 

government employees.

11 The Centers for Medicare & Medicaid Services (CMS), a branch of the U.S. Department of Health and Human 

Services (HHS), is the federal agency that administers the national Medicare program.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 6

The governing documents have not changed since we published the results of our prior 

mandated improper payment audit.

As part of an extended enterprise, CMS provided the RRB with Railroad Medicare payment 

integrity information and data for the second year in a row, in time for fiscal year 2019 PAR 

reporting. The Railroad Medicare improper payment rate and estimates were determined 

through CMS’ Comprehensive Error Rate Testing (CERT) program. As such, the RRB should have 

reported Railroad Medicare payment integrity information in its PAR which it did not. We 

discuss this in the section titled Requirements #3 through #6 – RRB did not Publish an IP 

Estimate, a Corrective Action Plan, a Reduction Target, or IP Rate of Less than 10 Percent for 

Railroad Medicare.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 7

RESULTS OF AUDIT

We have determined the RRB was not compliant with IPERA because it did not satisfy four of six 

payment integrity reporting requirements as shown in Table 2.

12 If an agency does not meet 

one or more of the six requirements, then it is not compliant under IPERA. The RRB’s position 

was that CMS is responsible for the Medicare program as a whole, the RRB’s Medicare 

responsibilities were limited overall, and if RRB published Railroad Medicare payment integrity 

information it would have resulted in duplicative reporting.

Table 2. Assessment of RRB’s Compliance with IPERA

Program 

Name

#1 - Published a PAR

#2 - Conducted a Risk 

Assessment

#3 - Published an Improper 

Payment Estimate

#4 - Published Corrective Action 

Plans

#5 - Published and is Meeting 

Reduction Targets

#6 - Reported an Improper 

Payment Rate of Less than 

10 Percent

RRA Compliant Not applicable Not applicable Not applicable Not applicable Not applicable

RUIA Compliant Not applicable Not applicable Not applicable Not applicable Not applicable

Railroad

Medicare

Compliant Not applicable Noncompliant Noncompliant Noncompliant Noncompliant

Vendor 

Payments

Compliant Not applicable Not applicable Not applicable Not applicable Not applicable

Employee 

Payments

Compliant Not applicable Not applicable Not applicable Not applicable Not applicable

Source: RRB OIG analysis of fiscal year 2019 Performance and Accountability Report (PAR).

We determined the agency’s payment integrity reporting was incomplete and therefore 

inaccurate. The agency could correct these deficiencies by implementing recommendations 

made in our prior RRB OIG improper payment audit. At the time of this audit, the prior year 

audit recommendations remained open.

13

We did not evaluate RRB’s performance in reducing improper payments for the RRA and RUIA 

programs because the RRB received RRA and RUIA reporting relief in July 2018. Using available 

information outside of the RRB’s PAR, we determined the RRB’s performance in reducing 

Railroad Medicare improper payments was inadequate and some of the RRB’s recapture 

program information needs improvement. As part of this audit, we determined some of RRB’s 

 12 Pub. L. 111-204, 124 Stat. 2232-2233 (2010). 13 RRB Office of Inspector General (OIG), Audit of Railroad Retirement Board’s Compliance with Improper Payments 

Elimination and Recovery Act in Fiscal Year 2018 Performance and Accountability Report, Report No. 19-09

(Chicago, IL: May 30, 2019), Recommendations 4, 5, 6, 7, 9 and 19.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 8

additional reporting requirements pertaining to improper payment barriers, improper payment 

accountability, information systems and other infrastructure, and relief from annual reporting 

request were missing. We made a few other observations regarding timeliness of data and 

achieving an optimal sampling and estimation plan. In a prior RRB OIG audit, we made 

recommendations to correct these issues. At the time of this audit, the prior year audit 

recommendations remained open.14

Beginning with fiscal year 2011, IPERA requires that we annually assess and report on six areas 

of compliance with criteria listed in the law. We considered OMB and Council of Inspectors 

General on Integrity and Efficiency guidance for our evaluations of the additional reporting 

required in statute. We have provided the details of these compliance assessments, audit 

findings, observations, and recommendations for corrective action in this report.

We made five recommendations to address the exceptions identified during our audit. The full 

text of management’s response to these recommendations is included in Appendix I and II.

Payment Integrity Reporting Required in Statute

The RRB was not compliant with IPERA because it did not satisfy four of six payment integrity 

reporting requirements as shown in Table 2.15 If an agency does not meet one or more of the 

six requirements, then it is not compliant under IPERA. The RRB’s position was that CMS is 

responsible for the Medicare program as a whole, the RRB’s Medicare responsibilities were 

limited overall, and if RRB published Railroad Medicare payment integrity information it would 

have resulted in duplicative reporting. We discuss our findings in the following sections.

Requirement #1 – RRB Published a Performance and Accountability Report

The RRB published a PAR for fiscal year 2019 and posted the report and accompanying 

materials required under OMB guidance on the agency website. Therefore, the RRB complied 

with the first of six payment integrity reporting requirements. The RRB included in its PAR a link 

to www.paymentaccuracy.gov.

Federal agencies are required to publish an AFR or PAR for the most recent fiscal year and post 

that report and any accompanying materials required by OMB on the agency website. The 

agencies must report information on payment integrity, disclosing payments that were 

processed correctly, and those payments that were improper.

 14 RRB OIG, Report No. 19-09. 15 Pub. L. 111-204, 124 Stat. 2232-2233 (2010).
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 9

Requirement #2 – RRB was not Required to Conduct Risk Assessments

The RRB was not required to conduct risk assessments for RRB’s five programs during the 

fiscal year 2019 PAR reporting cycle. This is the second of six payment integrity reporting 

requirements. Risk assessments were not applicable because

 OMB granted the RRB relief from reporting improper payments for the RRA and RUIA 

programs on July 19, 2018;

 RRB reported an improper payment estimate for Railroad Medicare in the fiscal year 

2018 PAR. However, RRB ceased reporting Railroad Medicare improper payment data 

beginning with the fiscal year 2019 PAR; and

 RRB deemed the non-benefit paying programs, vendor and employee payment 

programs, not susceptible to significant improper payments in its fiscal year 2017 PAR 

reporting.

If required, federal agencies should conduct a program specific risk assessment for each 

program or activity that conforms with section 2(a) of the Improper Payments Information 

Act of 2002.16 For programs that are deemed to be not susceptible to significant improper 

payments, agencies are required to perform risk assessments at least once every three years. 

Programs already reporting an improper payment estimate do not need to perform an 

additional improper payment risk assessment.

Requirements #3 through #6 – RRB did not Publish an IP Estimate, a Corrective 

Action Plan, a Reduction Target, or IP Rate of Less than 10 Percent for Railroad 

Medicare

The RRB was not required to publish payment integrity information on RRA, RUIA, vendor 

payments, or employee payments. However, the RRB did not publish payment integrity 

information or improper payment data for Railroad Medicare. Therefore, the RRB was

noncompliant with requirements three through six. To comply with

 Requirement #3 – Publish an Improper Payment Estimate, federal agencies must publish 

improper payments estimates for all programs and activities identified under section 

2(c) of the Improper Payments Information Act of 2002 in the accompanying materials 

to the annual financial statement;

 Requirement #4 – Publish a Corrective Action Plan, federal agencies must publish 

programmatic corrective action plans prepared under section 2(d) of the Improper 

Payments Information Act of 2002 in the accompanying materials to the annual financial 

statement;

 Requirement #5 – Publish and Meet Annual Reduction Targets, federal agencies must 

publish improper payments reduction targets established under section 2(d) of the 

Improper Payments Information Act of 2002 for each program assessed to be at risk, 

and meet such targets; and

 16 31 U.S.C. § 3321.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 10

 Requirement #6 – Report a Gross Improper Payment Rate of Less than 10 Percent, 

federal agencies are required to report a gross improper payment rate of less than 

10 percent for each program and activity for which an estimate was published under 

section 2(b) of the Improper Payments Information Act of 2002.17

The RRB did not publish the required information because the RRB’s position was that CMS is

responsible for the Medicare program as a whole, the RRB’s Medicare responsibilities were

limited overall, and if RRB published Railroad Medicare payment integrity information it would 

have resulted in duplicative reporting. According to a RRB statement found in its fiscal year 

2019 PAR,

It was subsequently learned that these same testing results were captured by the 

Department of Health and Human Services in their 2018 Agency Financial Report,

resulting in duplicative reporting. After consultation with the RRB Office of General 

Counsel (OGC) and Centers for Medicare and Medicaid Services (CMS), it was decided 

that the RRB would no longer report the results of this testing in the P&AR. This 

decision was shared with OMB with no objections. As such, the RRB will cease 

reporting Railroad Medicare improper payment data beginning with the fiscal year 

2019 Payment Integrity Report.

We reached out to OMB regarding this matter, and OMB’s response was that they did not 

officially approve RRB to make this change. Instead, OMB advised that RRB and CMS should 

work together on the issue. Office of Programs management stated that RRB and CMS were 

working on an updated MOU between RRB and CMS, which would clarify each agency’s 

responsibilities regarding Railroad Medicare reporting of improper payments.18 They expect the 

agreement to be finalized by the end of 2020. Until the MOU is finalized, RRB’s position was 

that they have a tentative agreement with CMS that Railroad Medicare reporting 

responsibilities belonged to CMS.

Furthermore, the RRB’s assertion that its responsibilities were limited is particularly misleading. 

For example, the RRB reviews Palmetto’s invoices and authorizes payment to Palmetto based

on their adherence to the contract between RRB and Palmetto. In 2019, the RRB reviewed and 

approved approximately $18.3 million worth of invoices. CMS does not perform this function or 

have the power of the purse with regards to Palmetto.

During our audit we asked members from the Office of Programs and the Bureau of Fiscal 

Operations what the RRB reviewed to support their claim of duplicate reporting. They explained 

that they reviewed HHS’ AFR. At a later date, the Director of the Office of Programs clarified 

and stated, “I reviewed the HHS AF[R] and a specific mention of the Palmetto SMAC is not 

there.” Additionally, we determined the RRB did not have any of the appropriate 

documentation to support the inclusion of RRB’s Railroad Medicare in HHS’ overall Medicare 

Fee-for-Service (FFS) improper payment reporting.

 17 31 U.S.C. § 3321. 18 We made this recommendation in RRB OIG Report No. 19-09 and at the time of that audit the RRB nonconcurred 

with the recommendation.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 11

Our IG wrote directly to the CMS administrator and to Congress about Railroad Medicare

improper payment reporting and overall program responsibility. The IG concluded that

While benefits received under Railroad Medicare are solely for qualified railroad 

beneficiaries, the quality of healthcare, monthly premium cost, and customer service 

are not distinct from traditional Medicare. If RRB management denies ownership of 

its Railroad Medicare program and does not accept responsibility for minimizing 

improper payments, there is no practical reason for its existence.

As a result of RRB’s noncompliance with four of six payment integrity reporting requirements, 

the RRB has not adequately prevented improper payments, reduced improper payments, or 

provided complete transparency of improper payment rates for a program it is responsible for 

overseeing and administering. As such, the RRB did not disclose to the public and Congress the 

following information about the Railroad Medicare program and the performance of the RRB’s 

SMAC, Palmetto GBA:

 The RRB had $107.1 million in projected improper payments.

 The RRB did not have a corrective action plan to reduce the prior year’s improper 

payment rate. The prior year’s rate was 10.53 percent as published by the RRB in its 

fiscal year 2018 PAR, this triggered the need for a corrective action plan.

 The RRB did not publish an annual reduction target for this year or meet last year’s 

published rate of 9.93 percent. 

 The RRB had a gross improper payment rate of 12.5 percent, which exceeded the 

10 percent threshold.

19

At the time of this report, the RRB had been noncompliant for two consecutive fiscal years.

Recommendation

We recommend that the Office of Programs

1. create and submit proposals to Office of Management and Budget during their next 

budget submission that will bring the agency into compliance. If the Director of Office of 

Management and Budget determines that additional funding would help the agency 

become compliant, the agency should obligate an amount of additional funding 

determined by the Director of Office of Management and Budget to intensify 

compliance efforts.

Management’s Comments and Our Response

In response to our draft report, the Office Programs stated,

[t]he question of RRB’s responsibilities with respect to Medicare and the RRB [SMAC]

contract has been researched and addressed in the past. Through consultation with 

 19 The information provided is according to a CMS’ Comprehensive Error Rate Testing report titled November 2018

Final Report For Contractor RRB. The report included reviewed claims data from the sampling period July 2016 

through June 2017.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 12

the CMS and our Office of General Counsel, we agree that CMS is responsible for 

reporting the Medicare [FFS] program improper payment rate as determined through 

the [CERT] program.

... CMS and RRB agree that Medicare FFS should be treated as one program and the 

Medicare FFS program improper payment rate will continue to be reported in HHS’s 

[AFR]. The RRB is bound by CMS’ regulations and procedures addressing the Medicare 

program.

CMS and RRB agreed that RRB would no longer separately report SMAC improper 

payment rate information inasmuch as the RRB SMAC is included in the Medicare FFS 

program improper payment rate reported in the HHS AFR. RRB shared this decision 

with OMB. This is in no way an attempt to mask any significant improper payment 

rates, but rather to ensure correct improper payment reporting consistent with CMS’ 

Medicare FFS improper payment rate measurement program. The RRB will continue 

to work in partnership with CMS and carry out our responsibility for proper 

administration of the SMAC contract with Palmetto GBA, including ensuring that the 

SMAC diligently performs required activities to reduce its improper payment rate. In 

addition, the RRB is working in partnership with CMS to finalize the MOU to delineate 

the duties and responsibilities of each Agency.

As a part of our contract administration, the RRB is responsible for utilizing the 

improper payment rate information provided by CMS in conjunction with CMS’ 

regulations and procedures addressing Medicare to work with the SMAC to reduce 

Medicare FFS improper payments. ... Reducing improper payments is a goal that is 

shared throughout the Federal government and the RRB will continue to do our part 

to reduce improper payments whenever and wherever possible.

For recommendation 1, the Office of Programs nonconcurred and stated,

[t]hrough dialog with CMS, RRB learned that its separate reporting of the SMAC 

FY 2018 improper payment rate information was duplicative of the Medicare FFS 

improper payment rate reported in the HHS’s AFR and resulted in an overstatement 

of the Medicare FFS improper payment.... CMS reports a Medicare FFS program 

improper payment rate, which includes all CMS-contracted MACs and the RRB SMAC. 

... Although Section 1842(g) of the Social Security Act provides the RRB with the 

authority to contract with and to oversee a contractor to perform Medicare Part B 

functions, including the functions of determining Medicare Part B payment amounts 

and of making these Medicare Part B payments, CMS and RRB agree that Medicare 

FFS is one program for improper payment reporting purposes.

The comments provided by management did not warrant a modification to our report. We 

disagree with management’s comments for the reasons explained in our prior audit report and 

explained in the section of this report titled Requirements #3 through #6 – RRB did not Publish 

an IP Estimate, a Corrective Action Plan, a Reduction Target, or IP Rate of Less than 10 Percent 

for Railroad Medicare.

20 We have determined that the RRB should continue to separately 

report Railroad Medicare payment integrity information in its PAR due to the unique 

characteristics of RRB SMAC, its extended enterprise relationship with CMS, the lack of 

 20 RRB OIG, Report No. 19-09.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 13

transparency for a separate Railroad Medicare program, and the less than optimal sampling of 

the RRB SMAC, Palmetto GBA.

21

As discussed in our prior report and reiterated here, OMB guidance requires that, “[a]gencies 

should not put programs or activities into groupings that may mask significant improper 

payment rates by the large size or scope of a grouping.”22 The intent of the statement is to 

provide complete transparency of improper payment rates for a program that RRB is 

responsible for overseeing and administering. At the time of this report, Railroad Medicare 

improper payments had deteriorated further with an improper payment rate of 12.5 percent

and a monetary loss estimates of $104 million. We discussed duplication and transparency 

issues in the section of this report titled Railroad Medicare Payment Integrity Reporting and 

Improper Payment Data is Not Transparent in HHS’ Fiscal Year 2019 Agency Financial Report

and the consequences of a monetary loss of over $100 million in the section titled RRB did not 

Report a High Priority Program. Furthermore, as explained in the section of this report titled

Other Observation – Sampling and Estimation Plan Was not Optimal, CMS’ CERT sampling and 

estimation plan to calculate the National Medicare FFS improper payment rate had not 

changed. This left the RRB with a less precise and unreliable improper payment estimate and 

rate for the Railroad Medicare program.

It is important to reiterate the sampling issue. If RRB fulfills the actions as described in its 

management’s comments and nothing changes with the sampling size for its SMAC 

(Palmetto GBA) there will be a problem with the improper payment rate and estimation. It 

should not be relied upon. It is well within the RRB’s responsibilities to advocate for improved 

sampling for the RRB SMAC in the overall CERT sampling program. It is of concern that even 

when afforded with the opportunity to align with CMS’ accuracy requirements during its initial 

inclusion, the RRB chose the option that produced less precise results than that of the larger 

CMS Medicare Administrative Contractors (MAC). 

In response to RRB’s assertion of being bound by CMS’ Medicare regulations and procedures,

we provided some context. As addressed in the RRB’s contract with Palmetto GBA (RRB’s 

SMAC), the RRB is not completely bound by CMS. According to the contract’s statement of 

work, “[t]he Contractor shall perform all [MAC] Part B functions on behalf of [RRB] Medicare 

beneficiaries as specified in this SOW and outlined in both the Internet-Only-Manuals [IOM] ... 

and Paper-Based Manuals. For purposes of this contract, when differences or conflicts occur, 

this SOW shall take precedence over the IOMs unless otherwise specified.”

We urge the RRB to leverage the information presented in this report by being proactive with 

their stewardship while working in partnership with CMS. The RRB must advocate for a MOU 

 21 CMS contracted Medicare Administrative Contractors (MAC) processed Medicare claims for their respective 

geographical regions, whereas the RRB contracted SMAC processed Railroad Medicare claims nationwide. CMS 

does not treat the RRB SMAC in the same way as its own MACs. This has been discussed in past RRB OIG audit 

reports.

22 OMB M-18-20.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 14

that would clearly delineate the duties and responsibilities of each agency and provide the 

transparency as intended by law.

23

RRB’s Payment Integrity Reporting was Incomplete and Inaccurate

The RRB’s payment integrity reporting in its PAR was incomplete and therefore inaccurate. 

OMB guidance requires the RRB OIG to evaluate the accuracy and completeness of agency 

reporting of improper payment data. The RRB was not required to publish payment integrity 

information or improper payment data on RRA, RUIA, vendor payments, or employee 

payments. However, the RRB did not publish any Railroad Medicare information for payment 

integrity reporting requirements three through six. See the section in this report titled 

Requirements #3 through #6 – RRB did not Publish an IP Estimate, a Corrective Action Plan, a 

Reduction Target, or IP Rate of Less than 10 Percent for Railroad Medicare for details 

concerning this issue, the cause of the issue, and the corresponding recommendation to correct 

the deficiencies. We are not making recommendations for this finding due to the 

recommendation already made in this report which addressed the incomplete RRB agency 

reporting.

Agency Performance in Reducing and Recapturing Improper Payments

Needs Improvement

OMB guidance requires that the agency’s IG evaluate agency performance in reducing and 

recapturing improper payments. We did not evaluate RRB’s performance in reducing improper 

payments for the RRA and RUIA programs because the RRB received RRA and RUIA reporting 

relief in July 2018. Using available information outside of the RRB’s PAR, we determined that 

the RRB’s performance in reducing Railroad Medicare improper payments was inadequate and 

some of the RRB’s recapture program information needs improvement. We discuss our findings 

in reference to uncollectible amounts, the Do Not Pay (DNP) Initiative, and cost benefit analysis 

in the sections below.

RRB’s Improper Payment Reduction Efforts for Railroad Medicare were 

Ineffective

Even though the RRB did not report on its Railroad Medicare program in its PAR, we 

determined the RRB was unsuccessful in reducing improper payments. According to a CMS 

CERT report titled November 2018 Final Report For Contractor RRB, the Railroad Medicare 

improper payment estimate increased from $89.8 million to $107.1 million and the improper 

payment rate increased from 10.53 percent to 12.5 percent.24 The RRB should have used CERT’s 

November 2018 report to report on its Railroad Medicare program. 

 23 Pub. L. No. 111-204, 124 Stat. 2224 (2010), Pub. L. No. 112-248, 126 Stat. 2390 (2013), 

Pub. L. No. 107-300, 116 Stat. 2350 (2002). 24 The $89.8 million and the 10.53 percent was reported in the RRB’s fiscal year 2018 PAR using the CERT’s report 

titled November 2017 Final Report For Contractor RRB.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 15

The increase occurred due to an ineffective corrective action plan and a less than optimal 

sampling and estimation plan. We discuss this in the section titled The Sampling and Estimation 

Plan was Not Optimal.

Insufficient Information was Provided for Railroad Medicare’s Recapture 

Program, Uncollectible Amounts, and the Do Not Pay Initiative

For the second year in a row, the RRB did not include sufficient information about Railroad 

Medicare overpayment recapture data, Railroad Medicare uncollectible amounts, and did not 

provide a sufficient explanation of the DNP Initiative related to the Railroad Medicare program 

in its fiscal year 2019 PAR. This occurred because the RRB’s position was that CMS is 

responsible for the Medicare program as a whole, the RRB’s Medicare responsibilities were 

limited overall, and if RRB published Railroad Medicare payment integrity information it would 

have resulted in duplicative reporting.

In our prior year audit report, we determined that RRB did not include Railroad Medicare

uncollectible amounts in its fiscal year 2018 PAR. RRB provided Palmetto’s accounts receivable 

report for Railroad beneficiaries and providers to support the overpayments. It contained items 

such as amounts written off, bad debts, and allowance for uncollectible accounts. Additionally, 

we determined that the RRB did not provide a sufficient explanation in its fiscal year 2018 PAR 

on the DNP Initiative related to Railroad Medicare. We found that Palmetto used the List of 

Excluded Individuals and Entities to prevent improper payments. Using databases like those, 

meets the intent of public law that covers the DNP Initiative. In a prior RRB OIG audit, we made 

recommendations to correct these issues. At the time of this audit, the prior year audit 

recommendations remained open.25

Railroad Retirement Act and Railroad Unemployment Insurance Act Recapture 

Programs Could be Improved

The RRB’s RRA and RUIA recapture program information needs improvement. We evaluated

the reported RRA and RUIA payment recaptured data for fiscal years 2017 and 2018 as shown 

in Table 3. The data showed an increase in recoveries for RRA and the RRB continued to recover 

identified improper payments as described in its PAR.

 25 RRB OIG, Report No. 19-09, Recommendations 10 and 11.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 16

Table 3. Overpayments Recaptured Outside of Payment Recapture Audits

Fiscal Year RRA

Amount Recaptured

RUIA

Amount Recaptured

Cumulative

Amount Recaptured

Fiscal Years 2009 - 2018

2018 $72 million $25 million $501 million

2017 $70 million $25 million $265 million

Source: RRB PAR for fiscal year 2019.

We determined that no inconsistencies were found when examining the RUIA program 

payment recapture information, however not all payment recapture information published in 

the PAR for the RRA program agreed with the underlying supporting data. For fiscal year 2018, 

RRA returned payments in the preparation worksheet did not agree with what was recorded in 

the RRB's financial system, FMIS. 

This occurred because the preparer of the preparation worksheet used the collections detail 

from the TROR application to determine the total amount of RRA returned payments, which 

differed from the RRA return payments detail recorded in FMIS by total number of records and 

dollar values. Annually, the RRB certifies TROR to be accurate and consistent with the agency’s 

financial system. As a result, the $72 million shown in Table 3 was understated by 

approximately $100,113 which directly impacted the cumulative amount of $501 million.

Railroad Retirement Act and Railroad Unemployment Insurance Act Uncollectible Amounts

During our review of the recapture program for RRA and RUIA, we found the RRB provided

justification for uncollectible RRA and RUIA amounts in its PAR as required. The RRB identified 

the estimated amount determined to be uncollectible at $305,786.94 for RRA and $35,729.73

for RUIA. Additionally, the RRB waived $813,502.66 in RRA and RUIA benefit overpayments 

based on criteria established in the Code of Federal Regulations. 

Non-Benefit Programs: Vendor and Employee Payments Recapture Program

We could not determine if the RRB conducted a sufficient cost benefit analysis to forgo having a 

payment recapture audit program for vendor and employee payments. Instead, the RRB 

improperly relied on a risk assessment in its determination of cost effectiveness as reported in 

our prior audit. However, in the fiscal year 2019 PAR, the RRB made improvements to its 

payment integrity reporting. The RRB described actions taken to detect and quantify potential 

improper payments for vendor and employee payment programs, which included a summary of

their ongoing quality assurance (QA) reviews of these programs.

According to the fiscal year 2019 PAR, “[t]he most recent vendor payment QA reviews 

conducted during quarter two of fiscal year 2019 concluded that there were no improper 

vendor payments ... [and] [t]he most recent employee payment QA review conducted in 

June/July 2019 concluded that there were no improper employee payments.” The RRB’s 

position was that these QA results confirm that vendor and employee payment programs were 

not susceptible to significant improper payments, and that an improper payment recapture 

program was not necessary, or cost effective, at this time. 
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 17

The information provided in the PAR was not sufficient for our office to evaluate the accuracy 

of the RRB’s decision. As required by OMB M-18-20, the RRB should have provided the RRB OIG

and OMB with the analysis used by the agency to reach its decision. Based on the information 

presented in the PAR, we could not determine the approach or process used during the QA 

reviews, including the sample size. We were not provided with any underlying support to 

determine if statistical sampling was used or another appropriate cost benefit analysis was used 

in support of its decision. According to OMB M-18-20,

[i]f an agency determines that it would be unable to conduct a cost-effective payment 

recapture audit program for certain programs[,] ... it should notify OMB and the 

agency’s Inspector General of this decision and include any analysis used by the 

agency to reach this decision. The notification may take place in a memo that is 

submitted to OMB and the agency Inspector General via email.26

This matter was reported in our prior audit report, and our prior year audit recommendations 

remained open.27

Recommendations

We recommend that the Office of Programs

2. update the corrective action plan that was published in the Railroad Retirement Board’s 

fiscal year 2018 Performance and Accountability Report to reduce Railroad Medicare 

improper payments and publish it in the Railroad Retirement Board’s fiscal year 2020 

Performance and Accountability Report; and

3. publish Railroad Medicare overpayment recapture data in the Railroad Retirement 

Board’s fiscal year 2020 Performance and Accountability Report.

We recommend that the Bureau of Fiscal Operations

4. perform a reconciliation of Railroad Retirement Act overpayments recapture source 

data to the Financial Management Integrated System when preparing the payment 

recapture data worksheet to ensure accurate information is published in the Railroad 

Retirement Board’s Performance and Accountability Report’s payment integrity section.

Management’s Comments and Our Response

The Office of Programs did not concur with recommendations two and three. Their response 

was the same as their response to recommendation one. Our evaluation of their comments is 

also the same. Please refer to our comments for that recommendation.

For recommendation four, the Bureau of Fiscal Operations concurred with our 

recommendation.

 26 OMB M-18-20. 27 RRB OIG, Report No. 19-09, Recommendation 13.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 18

Additional Reporting Required in Statute

As part of this audit, we evaluated the agency’s additional reporting as required in 

OMB Circular A-136 and OMB M-18-20. We determined some of the RRB’s additional reporting 

requirements were missing. We discussed our findings in reference to improper payment 

barriers, improper payment accountability, information systems and other infrastructure, and 

relief from annual reporting request in the sections below.

Information on Railroad Medicare Improper Payment Barriers, Accountability, 

Information Systems, and Other Infrastructure was Missing

In the fiscal year 2019 PAR, RRB did not describe

 statutory or regulatory barriers that could limit corrective actions for Railroad Medicare; 

and

 specific performance appraisal criteria for its employees to reduce improper payments 

for the Railroad Medicare program. 

In our prior audit report we reported our concerns about Railroad Medicare barriers and 

accountability, and our prior year audit recommendations remained open.28

In the fiscal year 2019 PAR, RRB did not provide a description of information systems and other 

infrastructure it needs to reduce improper payments to the levels the agency had targeted; or a 

description of the resources the RRB requested in its most recent budget submission to 

Congress to establish and maintain the necessary controls, systems, and other infrastructure for 

the Railroad Medicare program. 

The RRB did not report this information because it is the agency’s position that CMS is 

responsible for the Medicare program as a whole, the RRB’s Medicare responsibilities were 

limited overall, and if RRB published Railroad Medicare payment integrity information it would 

have resulted in duplicative reporting.

RRB Improperly Ceased Payment Integrity Reporting for its Railroad Medicare 

Program

In fiscal year 2019, the RRB improperly stopped reporting Railroad Medicare payment integrity 

information and improper payment data. The agency did not use the process outlined in 

OMB M-18-20. According to OMB M-18-20,

[i]f an agency’s program has documented a minimum of two consecutive years of 

improper payments that are below the statutory thresholds - or otherwise can 

demonstrate that the program is no longer susceptible to significant improper 

payments ... the agency may request relief from the annual reporting requirements 

for this program or activity. 

 28 RRB OIG, Report No. 19-09, Recommendation 15 and 16.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 19

This request must be submitted in writing to OMB. In addition, the request should 

include an assertion from the agency’s Office of Inspector General that it concurs with 

the agency’s request for relief and agrees that the program is no longer susceptible to 

significant improper payments. Requests may be submitted without an assertion from 

the agency’s Office of Inspector General, if the agency notes the reason(s) the Office 

of Inspector General would not provide an assertion.

The RRB’s Railroad Medicare program did not have two consecutive years of improper 

payments below statutory thresholds or demonstrate that the program was no longer 

susceptible to significant improper payments.

RRB disagrees with our finding and contends that it did not seek relief from OMB because 

reporting Railroad Medicare improper payments in its PAR would have resulted in duplicate 

reporting, CMS is responsible for the Medicare program as a whole, and the RRB’s Medicare 

responsibilities were limited overall.

The RRB and HHS’ CMS provided no transparency of duplicative reporting. A reader of the HHS’ 

AFR would not be able to understand if the RRB’s Railroad Medicare program was included in 

the report or ascertain any payment integrity performance information about the RRB’s 

contractor, Palmetto GBA.

RRB did not Report a High Priority Program 

The RRB did not identify Railroad Medicare as a high priority program even though its improper 

payment monetary loss estimate was $104 million, exceeding the OMB established threshold of 

$100 million. The RRB should have included this information in its fiscal year 2019 PAR, which 

would ensure it was included on paymentaccuracy.gov and reported to the RRB OIG. 

RRB contends that reporting Railroad Medicare improper payments in its PAR would have 

resulted in duplicate reporting due to HHS reporting it in their AFR, CMS is responsible for the 

Medicare program as a whole, and the RRB’s Medicare responsibilities were limited overall.

Of notable concern, HHS Medicare FFS is a high priority program and will continue to be for the 

foreseeable future as it has eclipsed the $2 billion threshold at $31.62 billion based on 

fiscal year 2018 Medicare FFS improper payment rate data. If the RRB and CMS jointly believe 

that the RRB is not responsible for Railroad Medicare and it is a subcomponent of the HHS 

Medicare FFS program, then the additional reporting requirements of the larger high priority 

program would be inclusive of the RRB. Thus, the RRB and CMS should have ensured Railroad 

Medicare was appropriately represented in relevant HHS Medicare FFS high-priority program 

reporting. Yet, there is no evidence that this occurred or was discussed between RRB and HHS’ 

CMS. Whether the RRB reports Railroad Medicare in their PAR or contends that HHS has done 

so in their AFR, the RRB must be held accountable and reminded that improper payment 

reporting is more than producing a dollar estimate. The intent of the law was to eliminate and 

recover improper payments as described:

Per IPERIA, OMB will identify a list of high-priority programs for greater levels of 

oversight and review. OMB will utilize improper payment reporting in an agency’s AFR 

or PAR to make this determination. 
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 20

The threshold for high-priority program determinations for FY 2018 reporting, and for 

subsequent years, is $2 billion in estimated improper payments as reported in the AFR 

or PAR, regardless of the improper payment rate estimate. 

To reduce the monetary loss to the tax payers by issuing payments correctly the first 

time, in FY 2018[,] High Priority Programs will be combined with programs that have 

over a $100 Million or more in monetary loss. This is an opportunity to improve the 

efficiency of government programs by focusing on reducing incorrect payment[s] that 

result in monetary loss.

Under IPERIA, high-priority programs have the following additional requirements: 

a. Tailor corrective actions (see Part II.B.3) 

b. Publically report actions to prevent and recover improper payments (see Part II.B.4) 

c. Develop semi-annual or quarterly actions to reduce improper payments (see Part 

II.B.5) 

As such, the RRB did not provide complete transparency for a program it is responsible for 

overseeing and administering, which now is considered a high priority program by OMB. 

Recommendation

We recommend that the Office of Programs

5. resume payment integrity reporting in the Railroad Retirement Board’s performance 

and accountability report, as required by applicable improper payment laws, until 

official approval from Office of Management and Budget is obtained and updated 

governing documents between the Railroad Retirement Board and the Department of 

Health and Human Services have been signed to reflect the extended enterprise 

relationship between the two agencies.

Management’s Comments and Our Response

The Office of Programs did not concur with recommendation five. Their response was the same 

as their response to recommendation one. Our evaluation of their comments is also the same. 

Please refer to our comments for that recommendation.

Other Observations

While conducting this audit, we made other observations regarding transparency of data and 

achieving an optimal sampling and estimation plan. We describe the details of our observations 

in the next sections.

Railroad Medicare Payment Integrity Reporting and Improper Payment Data is 

Not Transparent in HHS’ Fiscal Year 2019 Agency Financial Report

As discussed in previous sections of this report, the RRB believed its Railroad Medicare 

improper payment information was being reported in HHS’ AFR. However, we could not locate 

any of this information in HHS’ AFR. We did not locate any reference to the RRB, Railroad 
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 21

Medicare, or Palmetto GBA in HHS’ Payment Integrity Report section of its AFR. For 

fiscal year 2019, there was no transparency for this separate Railroad Medicare program. RRB’s 

implementation of recommendation number five of this report could address this issue.

As determined in our prior audit report, the RRB’s Railroad Medicare data was approximately 

two years old in the fiscal year 2018 PAR because Railroad Medicare data was based on claims 

sampled between July 2015 and June 2016 for its payment reporting. This occurred even 

though approximately one year old data was available earlier than it was provided to the RRB.

In coordination with HHS OIG, HHS, and CMS and our review of HHS’s AFR, we determined that 

HHS issued its fiscal year 2018 AFR based on claims sampled between July 2016 and June 2017 

and not consistent with the RRB’s two year old sampling results. According to CMS, they 

focused on the overall Medicare payment integrity reporting results for their agency first. CMS 

explained they provided RRB with the sampling results at the same time as the other MACs. 

This practice has continued into the fiscal year 2019 reporting cycle. Our prior recommendation 

to correct this issue remained open.

29

We confirmed this by evaluating if the RRB’s fiscal year 2019 improper payment error 

rate of 12.5 percent was included in HHS’ fiscal year 2019 AFR. For this evaluation, we held 

discussions with CMS and obtained the applicable sample from them. We concluded that the 

rate of 12.5 percent was not included in HHS’ FY 2019 AFR. Instead, we determined the rate 

was included in HHS’ FY 2018 AFR. 

If RRB SMAC sampling continues in this way, the improper payment rate and estimate will 

continue to fluctuate and will be less reliable. This should be of great concern especially if the 

SMAC, Palmetto GBA, used this information for collecting award fees and other contractor 

bonuses.

The Sampling and Estimation Plan was Not Optimal

As of November 2019, CMS’ CERT sampling and estimation plan to calculate the National 

Medicare FFS improper payment rate was not changed to address sampling assumptions 

applicable to the larger jurisdictional MACs. These assumptions were not applicable to the RRB 

SMAC due to its small size, which left the RRB with an unreliable improper payment estimate 

and rate. 

In order for the RRB SMAC’s CERT results to meet OMB’s statistically valid and rigorous 

sampling definition in OMB M-18-20, the RRB must advocate for change and revisit suggested 

options made by CMS’ statistical contractor. If appropriately addressed by the RRB, CMS, and 

CMS’ CERT statistical contractor; the RRB SMAC’s CERT results will become more reliable and 

lead to improved improper payment reduction strategies. Until that occurs, the accuracy of the 

Railroad Medicare improper payments rate could be improved if the RRB requested an 

increased sample precision of +/- 3 percent. As discussed in our prior audit report, the RRB 

should be advocating for its sampling and estimation plan methodology and ensure it aligns

with CMS’ CERT sampling and estimation plan precision goals for the other MACs.

 29 RRB OIG, Report No. 19-09, Recommendation 18.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 22

In our prior audit report, we determined that the RRB did not ensure the Railroad Medicare’s 

sampling and estimation plan was at the optimal level, which is statistically valid and rigorous. 

OMB directs such agencies to work towards improving their plans to meet the requirements for 

statistically valid and rigorous plans. Further, the RRB’s sampling and estimation plan was 

incomplete for Railroad Medicare. Our prior year audit recommendations address these 

weaknesses and remained open.30

 30 RRB OIG, Report No. 19-09, Recommendations 4, 5, 6, 7, 9, 18, and 19.
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 23

APPENDIX I: MANAGEMENT COMMENTS
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OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 25
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

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OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 27

APPENDIX II: MANAGEMENT COMMENTS
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RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 28

APPENDIX III: PREVIOUS OFFICE OF INSPECTOR GENERAL OPEN AUDIT 

RECOMMENDATIONS FOR IMPROPER PAYMENT REPORTING

Railroad Retirement Board

Office of Inspector General Audit Reports

Report Recommendation Status

15-06 Take all of the necessary steps to prepare and submit the 

required plans within the 90 day reporting requirement.

(Recommendation 1)

Open

15-06 Ensure that the necessary policies and procedures are 

developed and documented for the agency’s use for the 

preparation of a risk assessment process that meets Improper 

Payment Elimination and Recovery Act of 2010 requirements. 

(Recommendation 2)

Open

15-06 Revise and document their definitions of improper 

underpayments for the Railroad Retirement Act program in 

compliance with Improper Payment Elimination and Recovery 

Act of 2010 guidance, and if similar definitions are used for 

other programs, revise them accordingly. (Recommendation 6)

Open

15-06 Develop and document the necessary policies and procedures 

for the review and validation of the Railroad Unemployment 

Insurance Act improper payment data to be reported in the 

Performance and Accountability Report. (Recommendation 9)

Open

No corrective action taken 

due to disagreement 

between agency and 

Office of Inspector 

General (OIG) auditors 

regarding which unit 

within the agency this 

recommendation should 

be directed.

15-06 Ensure that the proper controls are in place to make sure that 

the policies and procedures are followed to properly support 

the improper payment data reported for the Railroad 

Unemployment Insurance Act program. (Recommendation 10)

Open

No corrective action taken 

due to disagreement 

between agency and OIG

auditors regarding which 

unit within the agency this 

recommendation should 

be directed.

16-07 Revise its overall process for the Railroad Retirement Act

program that supports improper payment reporting 

requirements to ensure the accuracy of the data. 

(Recommendation 1)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

16-07 Document policies and procedures to ensure that entire 

receivable balances are recorded in the agency’s receivable 

system. (Recommendation 2)

Open
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 29

Railroad Retirement Board

Office of Inspector General Audit Reports

Report Recommendation Status

16-07 Revise its definitions of improper underpayments in the 

methodology used for the Railroad Unemployment Insurance 

Act program to ensure that it is in compliance with Improper 

Payment Elimination and Recovery Act of 2010 guidance.

(Recommendation 3)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

17-05 Take the actions as required by Office of Management and 

Budget guidance in regard to noncompliance for third 

consecutive year for the same program to ensure that RRB 

programs for vendor payments and employee payments are 

brought into compliance. (Recommendation 1)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

17-05 Revise its computation for application of improper payment 

percentages for the Railroad Retirement Act program 

associated with initial and post underpayments to ensure that 

they are separately applied to the applicable components in 

Railroad Retirement Board calculations of the total improper 

payments. (Recommendation 2)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

18-05 Identify and post all existing unposted returned payments. 

(Recommendation 2)

Open

18-05 Identify the cause for unposted returned payments and take 

the necessary corrective actions to ensure the accuracy of 

future reported recaptured amounts.

(Recommendation 3)

Open

19-09 Submit a plan, within 90 days, to the Senate Committee on 

Homeland Security and Governmental Affairs, the House 

Committee on Oversight and Government Reform, and the 

Office of Management and Budget, describing the actions that 

the agency will take to become compliant. (Recommendation 

1)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Achieve a gross improper payment rate of less than 10 percent 

for Railroad Medicare. The Office of Programs through the 

Railroad Retirement Board’s Specialty Medicare 

Administrative Contractor should continue to work with 

Medicare providers to communicate the documentation 

requirements and monitor the adherence to such 

requirements throughout the year. (Recommendation 2)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Remove or update the navigation instructions to the 

Performance and Accountability Report. (Recommendation 3)

Open

19-09 Obtain and maintain the applicable Railroad Medicare 

sampling and estimation plan agency certification. It must be a 

Centers for Medicare and Medicaid Services’ certification, 

Railroad Retirement Board Chief Financial Officer’s 

certification, or other Railroad Retirement Board program 

official’s certification. (Recommendation 4)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 30

Railroad Retirement Board

Office of Inspector General Audit Reports

Report Recommendation Status

19-09 Obtain the Railroad Medicare sampling and estimation plan 

for the fiscal year 2019 payment integrity reporting cycle. 

(Recommendation 5)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Establish a written policy to ensure subsequent Railroad 

Medicare sampling and estimation plans are obtained and 

readily available for review so that a qualified statistician 

would be able to replicate what was done or so that Office of 

Management and Budget, agency Inspector General, or 

Government Accountability Office personnel can evaluate the 

design. (Recommendation 6)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Submit the Railroad Medicare sampling and estimation plan 

for fiscal year 2019 to the Office of Management and Budget 

by the June 30th deadline. (Recommendation 7)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Obtain the Office of Management and Budget approval for 

Railroad Medicare’s overall reduction target rate. 

(Recommendation 8)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Update the Memorandum of Understanding (MOU13-61) to 

describe the applicable agency responsibilities as they pertain 

to Improper Payments Elimination and Recovery Act laws and 

Office of Management and Budget guidance for payment 

integrity reporting. (Recommendation 9)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Include a brief narrative of the reduction in improper 

payments that is attributable to the Do Not Pay Initiative for 

Railroad Medicare and associated systems. (Recommendation 

10)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Identify, publish, and provide a justification for Railroad 

Medicare uncollectible amounts. (Recommendation 11)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Provide justification for Railroad Retirement Act and Railroad 

Unemployment Insurance Act uncollectible amounts. 

(Recommendation 12)

Open
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 31

Railroad Retirement Board

Office of Inspector General Audit Reports

Report Recommendation Status

19-09 Develop a payment recapture audit program for vendor and 

employee payments, or approved alternative method, if one is 

deemed cost effective. (Recommendation 13)

Open

19-09 If a payment recapture audit program is deemed not cost 

effective, provide a cost benefit analysis, in accordance with 

the Office of Management and Budget's best practices as 

outlined in OMB M-18-20, in writing to Office of Management 

and Budget and the Office of Inspector General, and include it 

in the fiscal year 2019 Performance and Accountability Report. 

(Recommendation 14)

Open

19-09 Adopt the Office of Management and Budget’s recommended 

best practice and describe statutory or regulatory barriers in 

the fiscal year 2019 Performance and Accountability Report. 

(Recommendation 15)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Update applicable performance appraisals with specific criteria 

for meeting applicable improper payment reduction targets 

and establish and maintain sufficient internal controls to 

reduce improper payments in accordance with Office of 

Management and Budget Circular A-136. (Recommendation 

16)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Develop and implement an internal control process (e.g. a 

checklist) to ensure all updates to OMB M-18-20 and Office of 

Management and Budget Circular A-136 relating to improper

payments are sufficiently addressed for payment integrity 

reporting. (Recommendation 17)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Work with the Centers for Medicare and Medicaid Services to 

meet the needs of Railroad Retirement Board’s payment 

integrity reporting. If the Railroad Retirement Board is not able 

to obtain claims data that coincides with the fiscal year being 

reported, obtain Office of Management and Budget’s approval 

for the delayed reporting timeframe. (Recommendation 18)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

19-09 Update the Memorandum of Understanding (MOU13-61) 

dated April 12, 2013 to ensure it reflects the applicable agency 

responsibilities as they pertain to improper payment reporting 

sampling and estimation plans. (Recommendation 19)

Open

Agency did not concur. 

OIG auditors believe this 

recommendation should 

still be implemented.

Source: RRB OIG analysis of open recommendation related to payment integrity reporting.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with Improper Payments Reporting - Report No. 20-06 32

APPENDIX IV: ABBREVIATIONS

AFR Agency Financial Report

CERT Comprehensive Error Rate Testing

CMS Centers for Medicare and Medicaid Services

DNP Do Not Pay Initiative

ERM Enterprise Risk Management

FFS Fee-For-Service

FMIS Financial Management Integrated System

HHS U.S. Department of Health and Human Services

IG Inspector General

IPERA Improper Payments Elimination and Recovery Act of 2010

IPERIA Improper Payments Elimination and Recovery Improvement Act of 2012

MAC Medicare Administrative Contractor

MOU Memorandum of Understanding

OIG Office of Inspector General

OMB Office of Management and Budget

PAR Performance and Accountability Report

QA Quality Assurance

RRA Railroad Retirement Act

RRB Railroad Retirement Board

RUIA Railroad Unemployment Insurance Act

SMAC Specialty Medicare Administrative Contractor

TROR Treasury Report on Receivables