U.S. RAILROAD RETIREMENT BOARD

OFFICE OF INSPECTOR GENERAL 

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 May 30, 2019
OFFICE OF INSPECTOR GENERAL

U.S. RAILROAD RETIREMENT BOARD

Audit of Railroad Retirement Board’s Compliance with

Improper Payments Elimination and Recovery Act in Fiscal

Year 2018 Performance and Accountability Report

Report Summary May 30, 2019 Report No. 19-09

What We Found

Our audit determined the RRB was not compliant with Improper 

Payments Elimination and Recovery Act (IPERA). The Railroad 

Retirement Board (RRB) reported a gross improper payment 

rate of 10.53 percent for the Railroad Medicare (RM) program, 

which exceeded the 10 percent threshold. As related to the 

scope of this audit, RRB through Palmetto GBA paid 

$852.8 million in RM Part B claims on behalf of its beneficiaries 

from July 1, 2015 through June 30, 2016.

Furthermore, we determined that 1) the accuracy and 

completeness of the agency’s reporting could be improved by 

obtaining and reviewing the sampling and estimation plan and 

updating the existing Memorandum of Understanding to reflect 

RRB and Centers of Medicare and Medicaid Services (CMS) 

responsibilities clearly and concisely; 2) the RRB’s payment 

recapture program for all benefit and non-benefit programs was 

missing information and needs improvement; and 3) some of 

RRB’s additional reporting requirements pertaining to improper 

payment barriers, improper payment accountability, and relief 

from annual reporting request were missing or late.

What We Recommend

To address the weaknesses identified in this audit, we made 

19 recommendations to 1) help the RRB to become compliant 

with IPERA; 2) improve the accuracy, completeness, and quality 

of agency reporting; and 3) improve the completeness of RRB’s 

sampling plan, reduction target, and meet additional reporting 

requirements in statute. RRB management concurred with 4 of 

the 19 recommendations. They asserted they will no longer 

report RM improper payments because, for improper payment 

purposes, CMS and RRB agreed that Medicare should be treated 

as one program. We continue to see the need for our 

recommendations as explained throughout this report in the 

sections titled “Management’s Comments and Our Response.”

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 U.S. 

Department of Health and Human 

Services Office of Inspector General

to obtain source data that 

supported the RRB’s Performance 

and Accountability Report (PAR).

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 2018 PAR, which 

consisted of fiscal year 2015 through 

fiscal year 2017 improper payment 

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

 

Contents

INTRODUCTION 1

OBJECTIVES, SCOPE, AND METHODOLOGY 1

BACKGROUND 2

RESULTS OF AUDIT 6

PUBLISH A PERFORMANCE AND ACCOUNTABILITY REPORT 7

CONDUCT RISK ASSESSMENT 7

PUBLISH IMPROPER PAYMENT ESTIMATES 8

PUBLISH CORRECTIVE ACTION PLANS 8

PUBLISH AND MEET ANNUAL REDUCTION TARGETS 9

REPORT A GROSS IMPROPER PAYMENT RATE OF LESS THAN 10 PERCENT 9

RECOMMENDATIONS 10

MANAGEMENT’S COMMENTS AND OUR RESPONSE 10

THE ACCURACY OF IMPROPER PAYMENT INFORMATION NEEDS IMPROVEMENT 14

RECOMMENDATION 14

MANAGEMENT’S COMMENTS 14

INCOMPLETE IMPROPER PAYMENT INFORMATION AND DATA FOR THE RAILROAD MEDICARE 

PROGRAM 15

INCOMPLETE SAMPLING AND ESTIMATION PLAN 15

INCOMPLETE REDUCTION TARGET 16

RECOMMENDATIONS 17

MANAGEMENT’S COMMENTS AND OUR RESPONSE 17

AGENCY PERFORMANCE IN REDUCING AND RECAPTURING IMPROPER PAYMENTS 18

RAILROAD MEDICARE RECAPTURE PROGRAM 18

RAILROAD RETIREMENT ACT AND RAILROAD UNEMPLOYMENT INSURANCE ACT 

RECAPTURE PROGRAMS 20

NON-BENEFIT PROGRAMS: VENDOR AND EMPLOYEE PAYMENTS RECAPTURE PROGRAM 21

RECOMMENDATIONS 22

MANAGEMENT’S COMMENTS AND OUR RESPONSE 22

ADDITIONAL REPORTING REQUIRED IN STATUTE 23

IMPROPER PAYMENT BARRIERS 23
OFFICE OF INSPECTOR GENERAL – U.S. RAILROAD RETIREMENT BOARD 

 

IMPROPER PAYMENT ACCOUNTABILITY 23

RELIEF FROM ANNUAL REPORTING 24

RECOMMENDATIONS 25

MANAGEMENT’S COMMENTS AND OUR RESPONSE 25

OTHER OBSERVATIONS 26

RAILROAD MEDICARE PAYMENT REPORTING DATA DOES NOT COINCIDE WITH 

FISCAL YEAR 2018 26

RECOMMENDATION 27

MANAGEMENT’S COMMENTS AND OUR RESPONSE 27

THE SAMPLING AND ESTIMATION PLAN WAS NOT OPTIMAL 27

RECOMMENDATION 28

MANAGEMENT’S COMMENTS AND OUR RESPONSE 28

APPENDIX I: MANAGEMENT COMMENTS 29

APPENDIX II: MANAGEMENT COMMENTS 35

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

PAYMENT REPORTING 36

APPENDIX IV: ABBREVIATIONS 38

LIST OF FIGURES

FIGURE 1. 12

FIGURE 2. 14

FIGURE 3. 16

LIST OF TABLES

TABLE 1. RRB IMPROPER PAYMENT AMOUNTS FOR BENEFIT PAYING PROGRAMS 5

TABLE 2. OIG ASSESSMENT OF THE SIX IPERA CRITERIA FOR RRB’S BENEFIT PAYING PROGRAMS 6

TABLE 3. RRB’S RISK ASSESSMENT REPORTING AS OF APRIL 2019 8

TABLE 4. RAILROAD MEDICARE IMPROPER PAYMENT ROOT CAUSE CATEGORIES 10

TABLE 5. PAYMENT RECAPTURE DATA FOR THE RM PROGRAM 18

TABLE 6. COMPARATIVE PAYMENT RECAPTURE DATA FOR RRA AND RUIA 20
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB’s Compliance with IPERA- Report No. 19-09 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 2018 compliance with the Improper Payments Elimination 

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

Improvement Act of 2012, 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.

Improper payment data reported in the RRB’s fiscal year 2018 Performance and Accountability 

Report (PAR) consisted of fiscal year 2015 through fiscal year 2017 improper payment data.2

To accomplish the audit objectives, we

 identified and reviewed criteria from federal improper payment laws, 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 2018 PAR, 

accompanying material, and related postings;

 requested source data 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;

 coordinated with the U.S. Department of Health and Human Services’ (HHS) OIG to 

obtain source data that supported RRB’s PAR;

 interviewed key individuals from the HHS’ Centers for Medicare and Medicaid Services 

(CMS) to gain an understanding of their roles and responsibilities as they apply to the 

RRB;

 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). 2 Specifically, July 1, 2015 through June 30, 2016 and October 1, 2016 through September 30, 2017.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 2

 interviewed appropriate RRB officials, agency staff, and RRB's Specialty Medicare 

Administrative Contractor (SMAC) Palmetto GBA;

 reviewed appropriate CMS documentation; and

 reviewed agency documentation.

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 were required to evaluate the efforts of the RRB to reduce the Railroad Medicare (RM) 

program’s improper payments and provide recommendations as needed to improve internal 

controls. We considered the Council of Inspectors General on Integrity and Efficiency guidance 

for evaluation of internal controls for our review of RM improper payments, which exceeded 

the predetermined threshold defined by law.

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

April 2019.

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 Railroad Retirement Act (RRA) and 

the Railroad Unemployment Insurance Act (RUIA). The RRB paid $13.1 billion in retirement and 

survivor benefits and $100.2 million in unemployment and sickness insurance benefits during 

fiscal year 2018.

The RRB also administers aspects of the Medicare program and has administrative 

responsibilities under the Social Security Act.3 According to the RRB’s 2018 Annual Report, 

“[t]hese costs were offset by approximately $27.2 million in reimbursements from the [CMS] 

for Part B Medicare costs....”4 As part of its administrative responsibilities, the RRB selected a 

carrier to process RM claims nationwide and administered the contract with the carrier, 

Palmetto GBA. The contracting officer and contracting officer’s representative responsible for 

the Palmetto contract are both RRB employees. As related to fiscal year 2018 PAR reporting and 

the scope of this audit, RRB through Palmetto paid $852.8 million in RM Part B claims on behalf 

of its beneficiaries from July 1, 2015 through June 30, 2016.

 3 Unless otherwise indicated, from this point forward in the report the term “Railroad Medicare (RM)” will imply 

“Medicare as administered by the Railroad Retirement Board (RRB) and its Specialty Medicare Administrative 

Contractor (SMAC), Palmetto GBA.” 4 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 Compliance with IPERA - Report No. 19-09 3

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).5

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);6

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

Improvement (OMB M-18-20); and7

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

8

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).”9 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.

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 

 5 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). 6 Office of Management and Budget (OMB), Management’s Responsibility for Enterprise Risk Management and 

Internal Control, Circular No. A-123, M-16-17 (Washington, D.C.: July 15, 2016). 7 OMB, Appendix C to Circular No. A-123, Requirements for Payment Integrity Improvement, M-18-20 

(Washington, D.C.: June 26, 2018). 8 OMB, Financial Reporting Requirements, Circular No. A-136 (Washington D.C.: July 30, 2018). 9 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 Compliance with IPERA - Report No. 19-09 4

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

risk to payment integrity that comes from the extended enterprise. This could include current 

and future legislation related to payment integrity, the current and future state of the 

economy, or public perception of agencies and the role of government. Like the extended 

enterprise, despite having little or no control, agencies retain the responsibility for the 

management of risk that comes from the greater risk environment.

With respect to RM program, the RRB had an extended enterprise relationship with CMS and 

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

RRB, CMS, and Palmetto were the

 Memorandum of Understanding between the HHS, CMS and RRB (MOU13-61), signed 

by CMS on April 11, 2013 and by RRB on April 12, 2013; and

 Statement of Work for RRB12C011 contract with Palmetto GBA, LLC.10

In the fiscal year 2018 PAR, the RRB reported RM payment integrity information and data for 

the first time. The RRB obtained the calculation of the RM improper payment rate and 

estimates through CMS’ Comprehensive Error Rate Testing (CERT) program. The RM program 

was included as part of CERT in July 2015. The CERT program estimates the Medicare Fee-forService improper payments. The program evaluates a statistically valid stratified sample of 

claims to determine, if they were paid properly under Medicare coverage, coding, and billing 

rules.

OMB guidance requires each agency’s Inspector General to assess IPERA compliance within 

180 days after the issuance of the agency’s PAR.11 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 or activity requires a review from OMB to 

determine if additional funding would help the agency become compliant. Noncompliance for 

three consecutive fiscal years for the same program or activity requires the agency to submit 

reauthorization proposals for each discretionary program or activity that has not been in 

compliance for three or more consecutive years, or proposed statutory changes to bring the 

program or activity into compliance.

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

annual PAR. The RRB’s improper payment amounts as reported in the RRB’s fiscal year 2018 

PAR are provided in Table 1.

 10 The RRB has been the awarding agency for this contract since September 28, 2012. At the time of this report, the 

potential award amount for this contract was $182,921,248. Of this amount, 66.8 percent ($122,262,376) has been 

obligated.

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

RRB Compliance with IPERA - Report No. 19-09 5

Table 1. RRB Improper Payment Amounts for Benefit Paying Programs

Program Outlays Improper Payments Improper Payment Percentage

RRA * * *

RUIA * * *

RM $852.81 million $89.78 million 10.53

Source: RRB PAR for Fiscal Year 2018.

*In July 2018, OMB granted the RRB reporting relief for the RRA and RUIA programs.

The RM amounts reported in Table 1 include improper payment data from CMS’ CERT program. 

The CERT improper payment data was based on claims sampled between July 1, 2015 and 

June 30, 2016. CMS provided it to the RRB in a November 2017 report.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 6

RESULTS OF AUDIT

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

payment integrity reporting requirements.12 The RRB reported a gross improper payment rate 

of 10.53 percent for the RM program, which exceeded the 10 percent threshold. If an agency 

does not meet one or more of the six requirements, then it is not compliant under IPERA. 

Table 2 summarizes our assessments.

Table 2. OIG Assessment of the Six IPERA Criteria for RRB’s Benefit Paying Programs

Program 

Name

Published a PAR

Conducted a Risk Assessment

Published an Improper 

Payment Estimate

Published Corrective Action 

Plans

Published and is Meeting 

Reduction Targets

Reported an Improper Payment 

Rate of Less than 10 Percent

RRA Compliant NA NA NA NA NA

RUIA Compliant NA NA NA NA NA

RM Compliant NA Compliant Compliant Compliant Non-compliant

Source: RRB OIG Analysis of Fiscal Year 2018 PAR.

Furthermore, we determined the accuracy and completeness of the agency’s reporting could be 

improved by obtaining and reviewing the sampling and estimation plan and updating 

MOU13-61 to reflect RRB and CMS responsibilities clearly and concisely.

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

RM programs because the RRB received RRA and RUIA reporting relief in July 2018, and it was 

the first year of RM reporting. However, we determined the RRB’s payment recapture program 

for benefit and non-benefit programs was missing information and needs improvement.

As part of this audit, we determined some of RRB’s additional reporting requirements 

pertaining to improper payment barriers, improper payment accountability, and relief from 

annual reporting request were missing or late. We made a few other observations regarding 

timeliness of data and achieving an optimal sampling and estimation plan.

 12 Pub. L. 111-204, 124 Stat. 2232-2233 (2010).
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 7

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 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.

Publish a Performance and Accountability Report

The RRB published a PAR for fiscal year 2018 and posted that 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 and informed the readers the link contained more detailed 

information. Please see the section later in this report titled “The Accuracy of Improper 

Payment Information Needs Improvement” for detailed assessment of the navigation 

instructions to the PAR.

Federal agencies are required to publish an Agency Financial Report (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.

Conduct Risk Assessment

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

fiscal year 2018 PAR reporting cycle. This is the second of six payment integrity reporting 

requirements. Table 3 summarizes our analysis of the RRB’s risk assessment schedule. 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 RM in the fiscal year 2018 PAR; and

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

programs, not susceptible to significant improper payments in the 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 2002.13 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.

 13 31 U.S.C. § 3321.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 8

Table 3. RRB’s Risk Assessment Reporting as of April 2019

Program Last Fiscal Year of Reporting a Risk 

Assessment or Equivalent

Next Fiscal Year the Agency Should 

Report a Risk Assessment

RRA 2017 PAR (Estimate)

2018 PAR (Relief from Reporting)

2020 PAR

RUIA 2017 PAR (Estimate)

2018 PAR (Relief from Reporting)

2020 PAR

RM 2018 PAR (Estimate) To Be Determined

Vendor 

Payments

2017 PAR (Assessment) 2020 PAR

Employee 

Payments

2017 PAR (Assessment) 2020 PAR

Source: RRB OIG Analysis.

Publish Improper Payment Estimates

The RRB published an improper payment estimate for the RM program in its fiscal year 2018 

PAR. Therefore, the RRB complied with the third of six payment integrity reporting 

requirements. This was the first year the RRB reported a RM improper payment estimate. The 

RRB relied on CMS’ CERT program for the accuracy and completeness of the estimate as 

explained later in this report.

Improper payment estimates were not reported for RRA and RUIA programs as the agency 

received reporting relief from OMB for these programs in July 2018. Vendor and employee 

payment estimates were not required because the RRB deemed them not susceptible to 

significant improper payments in the fiscal year 2017 PAR reporting.

If required, 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.14

Publish Corrective Action Plans

The RRB published a corrective action plan for the RM program. Therefore, the RRB complied 

with the fourth of six payment integrity reporting requirements. This is the only RRB program 

with published improper payment estimates, which exceeded the threshold for significant 

improper payments as defined by OMB guidance. OMB granted the RRB relief from reporting 

improper payments for the RRA and RUIA programs. Vendor and employee payment programs 

were not deemed susceptible for significant improper payments.

 14 31 U.S.C. § 3321.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 9

If required, federal agencies must publish programmatic corrective action plans prepared under 

section 2(d) of the Improper Payments Information Act of 2002 that the agency may have in the 

accompanying materials to the annual financial statement.15

Publish and Meet Annual Reduction Targets

The RRB published an annual reduction target for the RM program. Therefore, the RRB 

complied with the fifth of six payment integrity reporting requirements. They published a 

reduction target of 9.93 percent for fiscal year 2018 as recommended by CMS. This is the only 

RRB program with a published reduction target. OMB granted the RRB relief from reporting 

improper payments for the RRA and RUIA programs. Vendor and employee payment programs 

were not deemed susceptible for significant improper payments.

If required, 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.16

We did not assess whether the RRB met its RM annual reduction target because fiscal year 2018 

was the first year of improper payment estimate reporting for the RM program.

Report a Gross Improper Payment Rate of Less than 10 Percent

The RRB reported a gross improper payment rate of 10.53 percent for the RM program, which 

exceeded the 10 percent threshold. Therefore, the RRB is noncompliant with the last of six 

payment integrity reporting requirements. This was the first year RRB reported an improper 

payment rate for RM and it was the only program with a published rate. OMB granted the RRB 

relief from reporting improper payments for the RRA and RUIA programs. Vendor and

employee payment programs were not deemed susceptible for significant improper payments.

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(c) of the 

Improper Payments Information Act of 2002.17 According to Appendix C, 

... [f]or agencies that are not compliant for one fiscal year, within 90 days of the 

determination of non-compliance, the agency should submit a plan to the Senate 

Committee on Homeland Security and Governmental Affairs, the House Committee on 

Oversight and Government Reform, and the OMB, describing the actions that the 

agency will take to become compliant.

18

As shown in Table 4, overpayment errors were caused by incorrect coding, medical necessity, 

and insufficient documentation. Underpayment errors were caused by incorrect coding. The 

majority of RM improper payments were due to insufficient documentation. 

 15 31 U.S.C. § 3321. 16 31 U.S.C. § 3321. 17 31 U.S.C. § 3321. 18 OMB M-18-20.
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 10

During our audit, Office of Programs management stated that their position on our findings (for 

RM payment integrity reporting) was that CMS owns Medicare and the CERT program and the 

RRB is not responsible for either.

Table 4. Railroad Medicare Improper Payment Root Cause Categories

Type of 

Improper 

Payment

Root Cause Estimated Improper 

Payment

($ millions)

Proportion of 

Overall Estimated 

Improper Payments

Overpayment Administrative or Process Error Made 

by Other Party (Incorrect Coding)

$18.50 20.61%

Overpayment Insufficient Documentation to 

Determine

$69.54 77.45%

Overpayment Medical Necessity a $0.00 0.00%

Underpayment Administrative or Process Error Made 

by Other Party (Incorrect Coding)

$1.74 1.94%

Totals $89.78 100.00%

Source: RRB 2017 CERT Report Sampling Data.

a CERT attributed an estimated $691.70 to medical necessity. The improper payment amount is too small to show an improper 

payment rate above zero percent.

As a result of reporting a gross improper payment rate of more than 10 percent, the RRB has 

not adequately prevented improper payments and they have incurred additional reporting 

requirements. At the time of this report, the RRB has been noncompliant for one fiscal year.

Recommendations

We recommend that the Office of Programs

1. 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; and

2. 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.

Management’s Comments and Our Response

In response to our draft report, the Offices of Administration and Programs stated,

[t]hrough consultation with CMS and the Office of General Counsel (OGC) we agree 

that CMS is responsible for the Medicare program as a whole. Section 1842(g) of the 
OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

RRB Compliance with IPERA - Report No. 19-09 11

Social Security Act provides that RRB’s administrative responsibilities are limited to 

the determination of rights and certification of individuals as eligible for Medicare 

coverage and contracting for the administration of Part B. The statute does not grant 

RRB authority to administer the Medicare program or disburse payments to Medicare 

providers or contractors. As such, for improper payment purposes, CMS and RRB agree 

that Medicare should be treated as one program.

For recommendations 1 and 2, the Office of Programs nonconcurred and stated,

[e]ffective with fiscal year (FY) 2019[,] the Railroad Retirement Board (RRB) will no 

longer report on Medicare improper payments in the Performance and Accountability 

Report (PAR). The RRB reporting Medicare improper payment data is redundant to 

Medicare improper payment reporting completed by the United States Department of 

Health and Human Services (HHS). Therefore, the RRB obtained Board approval to 

cease reporting Medicare improper payment data prospectively.

OIG disagrees with management’s response. Although the RRB received Board approval to 

cease the reporting of improper payment data, such approval is not sufficient because IPERA 

does not provide authority to the RRB’s Board to grant relief from reporting. Under IPERA, OMB 

approval is needed to provide RRB with any reporting relief. The RRB identified RM as being 

susceptible for improper payments, thus subjecting the program to improper payment 

reporting requirements. Once an agency starts reporting, they must report for a minimum of 

two consecutive years before requesting that OMB grant them relief from annual reporting.

With respect to RRB’s viewpoint that separately reporting RM is redundant to the Medicare

improper payment reporting completed by HHS, it is pertinent to highlight OMB guidance 

regarding groupings of programs. Appendix C to OMB Circular No. A-123 requires that, 

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

improper payment rates by the large size or scope of a grouping.”

The intent of the statement is to provide complete transparency of improper payment rates for 

programs an agency is responsible for overseeing and administering. While maintaining the 

same principle of the guidance in Appendix C, a significant improper payment error rate of a 

small program should not be combined with a large program that has a rate below the 

statutory threshold to allow the otherwise noncompliant smaller program to become 

compliant. If the RRB follows through with its intentions of not reporting next year, it will be 

masking the fact that its performance in reducing improper payments has deteriorated further. 

We have documentation to show that next year’s RM improper payment rate will be 

12.5 percent.

The RRB is the first line of defense to deter and detect improper payments related to fraud 

attributable to RM beneficiaries as the RRB determines if a railroad worker or beneficiary is 

eligible to qualify for Medicare. The RRB is required to have appropriate procedures in place to 

ensure beneficiaries cannot erroneously or fraudulently receive RM Part B benefits or pay

premiums for such benefits. The RRB is not bound by another organization to fulfill these 

responsibilities that have been entrusted to them by CMS and the public. On average of 

$10.5 million per year, CMS pays the costs incurred by the RRB for services performed pursuant
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RRB Compliance with IPERA - Report No. 19-09 12

to section 1840(b)(1) and section 1842(g) or pursuant to section 1860D-13(c)(1) or 

1854(d)(2)(A) of the Social Security Act. This amount does not include the cost of the RRB’s 

contract with Palmetto GBA.19

Further, OIG believes the magnitude of the RRB’s administrative responsibilities needs to be 

reiterated. The RRB’s use of the word limited in its response is misstating the RRB’s actual 

authority, responsibilities, and influence for the following reasons.

The RRB has been the awarding agency for its SMAC contract with Palmetto GBA, since 

September 28, 2012. At the time of this report, the potential award amount for this seven year 

contract was approaching $200 million. Of this amount, approximately $122 million has already 

been obligated or paid by the RRB’s contracting team. The RRB paid Palmetto GBA to process 

RM Part B claims and provide value-added services to the railroad community that according to 

the RRB, the CMS’ MACs do not perform. It is pertinent to note that RM is only 0.2 percent of 

total overall Medicare expenditures.

Additionally, the RRB has the responsibility to assign a contracting officer and contracting 

officer representative in order to oversee fulfilment of SMAC’s contractual obligations. These 

RRB employees, not CMS employees, determine if the monthly invoices submitted by SMAC 

should or should not be paid and conduct SMAC quality assurance reviews.

Even though the RRB does not make direct payments to providers, the RRB’s SMAC determines

if payments to providers should be made on behalf of the RRB’s beneficiaries. When it comes to

identifying improper payment root causes, the errors are a result of the agency or contractor 

failing to correctly process, verify, or obtain sufficient documentation prior to the payment 

being authorized or disbursed; therefore, the responsibility to prevent and reduce improper 

payments is more dependent upon sound agency processes including effective RRB contracting 

oversight as opposed to whom disburses the payment to the Railroad Medicare providers. As 

mentioned earlier in this report’s section titled “Background,” we said, “with respect to RM 

program, the RRB had an extended enterprise relationship with CMS and the RRB’s SMAC, 

Palmetto GBA.” An excerpt from the MOU supporting the extended enterprise relationship is 

given in Figure 1.

Figure 1. 

Source: MOU13-61.

 19 42 U.S.C. § 1395t.
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RRB Compliance with IPERA - Report No. 19-09 13

According to OMB M-16-17 and OMB M-18-20, as part of the extended enterprise,

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

risk to payment integrity that comes from the extended enterprise. This could include 

current and future legislation related to payment integrity, the current and future 

state of the economy, or public perception of agencies and the role of government. 

Like the extended enterprise, despite having little or no control, agencies retain the 

responsibility for the management of risk that comes from the greater risk 

environment.

RRB has displayed a pattern of inconsistency regarding their responsibility and authority when 

it comes to certain aspects of RM. For example, the RRB was able to implement a 

recommendation through the SMAC from RRB OIG Report No. 15-07 that improves the 

accuracy of particular chiropractic claims processing and payments yet, the RRB will not accept 

their overall role to improve the RM improper payment error rate.20 Furthermore, they will not 

consider advocating improvements to RM sampling and estimation as part of CMS’ CERT 

program that would unlikely be raised if absorbed by CMS.

It is our position that until the law changes, or CMS absorbs the administration of RM and the 

contracting oversight of the RRB’s SMAC, or both, the RRB should continue to report improper 

payment data on RM. If not, there is a concern of transparency as the RRB would not be held 

accountable for its role in maintaining effective oversight of the SMAC, which includes ensuring 

the contractor is appropriately implementing corrective actions such as automated edits or 

other procedures directed by CMS that would subsequently effect RM improper payment 

reporting.

 20 RRB OIG, Railroad Retirement Board Medicare Contract Oversight Did Not Effectively Mitigate Chiropractic 

Service Risks, Report No. 15-07 (Chicago, IL: June 4, 2015).
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RRB Compliance with IPERA - Report No. 19-09 14

The Accuracy of Improper Payment Information Needs Improvement

OMB guidance requires the RRB OIG to evaluate the accuracy of agency reporting. We 

determined the RRB’s payment integrity reporting was accurate but could be improved.

Navigation instructions to the PAR need improvement. The RRB’s improper payment data was 

included in the PAR and referred readers to “... www.paymentaccuracy.gov (Resources tab, 

listed under Links to Agency Annual Financial Reports).”21 However, the RRB provided 

superfluous instructions to access the additional information from the hyperlink. At the time of 

review, we found the navigation instructions were incorrect because the owners of the 

payment accuracy website had changed the organization of the page, including the subheading 

that was supposed to be titled “Links to Agency Annual Financial Reports.” This subheading was 

removed. When attempting to navigate to the RRB’s PAR from the new subheading and link 

provided as shown in Figure 2, we could not access the report.

Figure 2. 

Source: https://paymentaccuracy.gov/resources/ accessed on March 25, 2019.

Recommendation

3. We recommend that the Office of Programs remove or update the navigation 

instructions to the Performance and Accountability Report.

Management’s Comments

The Office of Programs concurred with our recommendation.

 21 RRB Performance and Accountability Report (PAR) for Fiscal Year 2018.
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RRB Compliance with IPERA - Report No. 19-09 15

Incomplete Improper Payment Information and Data for the Railroad 

Medicare Program

OMB guidance required the RRB OIG to evaluate the completeness of agency reporting. We 

determined the RRB’s sampling and estimation plan and reduction target were incomplete for 

RM.

Incomplete Sampling and Estimation Plan

The RRB’s sampling and estimation plan for RM was incomplete. We determined the RRB’s 

Chief Financial Officer (CFO) or other RRB agency program official did not certify the plan; the 

RRB did not possess the plan or the plan’s applicable CMS certification; and the RRB did not 

submit the plan by the June 30 deadline. Based on the documentation reviewed, we could not 

determine if CMS certified the RM plan.

IPERA requires agencies to produce statistically valid estimates of improper payments; 

therefore, each plan must be accompanied by a certification stating the methodology will 

produce a statistically valid estimate. The certification should have been signed by an RRB 

official of the RRB’s choosing (e.g., this could be the CFO, Deputy CFO, or a program official).

According to the current and prior Appendix C to OMB Circular A-123 (Appendix C), agencies 

are responsible for designing and documenting their sampling and estimation plan.22 Each plan 

should be prepared by a statistician and submitted to OMB no later than June 30th of the 

fiscal year for which the estimate is being produced.

In coordination with HHS OIG, we obtained RRB’s RM sampling and estimation plan directly 

from HHS because the RRB did not possess it as required. We determined RRB relied on CMS’ 

CERT sampling and estimation plan without complete examination and did not evaluate the 

completeness of the RM’s plan. According to the RRB’s CFO and management in the Office of 

Programs, CMS owns the CERT and Medicare programs and the RRB is not responsible for 

either, including the sampling and estimation plan. They believed this because of the contents 

of MOU13-61.

 22 Unless otherwise indicated, from this point forward in the report the term “Appendix C” will imply “Appendix C 

to OMB Circular No. A-123.” The prior Appendix C was titled and dated: OMB, Appendix C to Circular No. A-123, 

Requirements for Effective Estimation and Remediation of Improper Payments, M-15-02 (October 20, 2014). The 

current Appendix C in effect at the time of this audit was titled and dated: OMB, Appendix C to Circular No. A-123, 

Requirements for Payment Integrity Improvement, M-18-20 (June 26, 2018).
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RRB Compliance with IPERA - Report No. 19-09 16

We examined the MOU to determine RRB and CMS agency responsibilities for the CERT 

program. The only guidance we found regarding CERT is shown in Figure 3.

Figure 3. 

Source: MOU13-61.

The MOU was signed prior to RM’s inclusion in the CERT program and did not include anything 

regarding each agencies’ payment integrity reporting roles and responsibilities. According to 

the MOU, the scope of work should be expanded as necessary to meet the needs of both RRB 

and CMS. If both parties agree, additional responsibilities may be added to this MOU.

The MOU does not limit RRB's responsibility or ability to reduce improper payments. According 

to the MOU, the RRB and CMS must work together to meet the needs of both parties. 

Additionally, the MOU is to be executed within the terms of the RRB and Palmetto GBA 

statement of work. During the exit conference, management in the Office of Programs stated 

that the earliest update to the MOU would not be until September 2022. Appendix C, requires 

that the RRB

 maintains responsibility for managing risk to payment integrity that comes from the 

extended enterprise;

 should approach improper payments with an ERM framework in mind and link agency 

efforts in establishing internal controls and preventing improper payments; and

 is responsible for maintaining the documentation to demonstrate sampling and 

estimation steps were satisfied. The plans should generally provide sufficient 

documentation of the sample design, so that an agency’s Inspector General may 

evaluate the design.

Because of the incomplete sampling and estimation plan and its extended enterprise, the RRB 

did not meet the OMB standard for a statistically valid and rigorous plan. Additionally, RRB 

management believes it does not have full control to implement the oversight necessary to 

reduce improper payments for RM.

Please see the section in this report titled “Other Observations” for details concerning the RRB 

not ensuring that RM’s sampling and estimation plan was statistically valid and rigorous.

Incomplete Reduction Target

RRB’s Office of Programs did not obtain or possess documentation of OMB’s approval for the 

reduction target of 9.93 percent for RM program. According to Appendix C, the Director of OMB 

must approve reduction targets. This approval process would take place during the OMB review 

and approval process of data requests from OMB and the agencies draft AFRs and PARs.
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RRB Compliance with IPERA - Report No. 19-09 17

CMS recommended the RRB’s target of 9.93 percent for lowering the Part B improper payment 

rate and is why the RRB did not obtain or possess applicable documentation. During our audit, 

Office of Programs management stated that their position on our findings (for RM payment 

integrity reporting) was that CMS owns the CERT and Medicare programs and the RRB is not 

responsible for either.

Unapproved reduction targets may not yield the outcome desired by OMB regarding the level 

and timeline of reduction targets.

Recommendations

We recommend that the Office of Programs

4. 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;

5. obtain the Railroad Medicare sampling and estimation plan for the fiscal year 2019 

payment integrity reporting cycle;

6. 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;

7. submit the Railroad Medicare sampling and estimation plan for fiscal year 2019 to the 

Office of Management and Budget by the June 30th deadline; and

8. obtain the Office of Management and Budget approval for Railroad Medicare’s overall 

reduction target rate.

We recommend that the Office of Programs and the Office of Administration work together to

9. 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.

Management’s Comments and Our Response

The Offices of Administration and Programs did not concur with our recommendations.

The Office of Programs response for recommendations 4 through 8 were the same as their 

response to recommendations 1 and 2. Our evaluation of their comments is also the same. 

Please refer to our comments for those recommendations.
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RRB Compliance with IPERA - Report No. 19-09 18

For recommendation 9, the Offices of Administration and Programs stated, “The RRB remains

committed to having the most current Memorandum of Understanding (MOU) in place with the 

Center[s] for Medicare and Medicaid Services (CMS). However, the updating of the MOU 

requires collaboration of both CMS and the RRB. The RRB cannot mandate that the MOU be 

updated.”

OIG disagrees and believes that it is reasonable to collaborate with CMS and update the MOU 

governing the relationship between the RRB and CMS in order to make a clear distinction 

regarding responsibilities as they pertain to improper payment laws. This MOU was executed 

before the RM program was determined to be susceptible to improper payments.

Agency Performance in Reducing and Recapturing Improper Payments

OMB guidance requires that the agency’s Inspector General evaluate agency performance in 

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

reducing improper payments for the RRA, RUIA, or RM programs because the RRB received RRA 

and RUIA relief from reporting in July 2018 and it was the first year of RM reporting. However, 

we determined some of the RRB’s recapture program information was missing and needs 

improvement. We discussed our findings in reference to uncollectible amounts, the 

Do Not Pay (DNP) Initiative, and cost benefit analysis in the sections below.

Railroad Medicare Recapture Program

We did not evaluate RRB’s performance in reducing improper payments for the RM program in 

the fiscal year 2018 PAR because it was the first year of reporting. There was no improper 

payment rate or amount for RM presented in the fiscal year 2017 PAR. However, we did review 

recapture amounts, uncollectible amounts, and the DNP Initiative.

Railroad Medicare Recapture Amounts

The totals for RM reflect the amounts reported by RRB’s SMAC. Palmetto recovers all identified 

overpayments (including those identified by the CERT program) by standard payment recovery 

methods. We considered the amount recaptured sufficient as shown in Table 5.

Table 5. Payment Recapture Data for the RM Program

Amount Identified Fiscal Year 17 Amount Recaptured Fiscal Year 17

$5.31 million $4.69 million

Source: RRB’s Performance and Accountability Report (PAR) for Fiscal Year 2018.
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RRB Compliance with IPERA - Report No. 19-09 19

Railroad Medicare Uncollectible Amounts

During our review of the RM recapture program, we determined that RRB did not include RM 

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

report for Railroad beneficiaries and providers to support the aforementioned $5.31 million in 

overpayments. It contained items such as amounts written off, bad debts, and allowance for 

uncollectible accounts.

According to OMB Circular No. A-136, Financial Reporting Requirements, an agency should 

describe a justification of any overpayments that have been determined not to be collectible in 

its PAR.

The Office of Programs was not aware of the requirement to include RM uncollectible amounts 

in its fiscal year 2018 PAR. During our audit, Office of Programs management stated their 

position on our findings (for RM payment integrity reporting) was that CMS owns Medicare and 

the CERT program and the RRB is not responsible for them. By not providing the required 

information, RRB did not comply with the transparency requirements intended by OMB for the 

Congress and the public.

Railroad Medicare and the Do Not Pay Initiative

During our review of the agency’s performance in reducing and recapturing improper 

payments, we determined that the RRB did not provide a sufficient explanation in its 

fiscal year 2018 PAR on the DNP Initiative related to RM. We found that Palmetto used the List 

of Excluded Individuals and Entities (LEIE) to prevent improper payments. Using databases like 

those, meets the intent of public law that covers the DNP Initiative.

In accordance with OMB guidance, agencies should provide a brief narrative of the reduction in 

improper payments that is attributable to the DNP Initiative, as applicable.”23 Additionally, 

Improper Payments Elimination and Recovery Improvement Act of 2012 requires that

... [a]t a minimum and before issuing any payment and award, each agency shall 

review as appropriate the following databases to verify eligibility of the payment and 

award:

(A) The Death Master File of the Social Security Administration.

(B) The General Services Administration’s Excluded Parties List System.

(C) The Debt Check Database of the Department of the Treasury.

(D) The Credit Alert System or Credit Alert Interactive Voice Response System of the 

Department of Housing and Urban Development.

(E) The List of Excluded Individuals/Entities of the Office of Inspector General of the 

Department of Health and Human Services.24

 23 OMB Circular No. A-136. 24 Pub. L. 112-248, 126 Stat. 2393 (2013).
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RRB Compliance with IPERA - Report No. 19-09 20

As shown, LEIE is one of the required databases under the DNP Initiative. We believe the RRB 

could have included information related to improper payments found by Palmetto while they 

were using the LEIE.25 We considered the DNP Initiative as a whole and not just the DNP portal, 

which is a component of the Initiative. The public, including Palmetto, can obtain the LEIE 

without access to the DNP portal.

The narrative was not included because Office of Programs personnel attested that RRB did not 

issue payments for RM claims, the DNP portal is a tool for federal agencies, and Palmetto is not 

a federal agency and therefore not included in the DNP portal. During our audit, Office of 

Programs management stated that their position on our findings (for RM payment integrity 

reporting) was that CMS owns Medicare and the CERT program and the RRB is not responsible 

for either.

By not providing the required information, the RRB did not comply with the transparency 

directed by OMB for the Congress and the public.

Railroad Retirement Act and Railroad Unemployment Insurance Act Recapture 

Programs

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

programs because the RRB received relief from reporting in July 2018. Therefore, RRB did not 

include any RRA or RUIA improper payment data. Due to the OMB approved relief from 

reporting, the RRA and RUIA programs are not considered susceptible to significant improper 

payments and return to a risk assessment reporting cycle.

We were able to compare reported RRA and RUIA payment recaptured data for 

fiscal years 2016 and 2017 as shown in Table 6. The data showed an increase in recoveries and 

the RRB continued to recover identified improper payments as described in its PAR.

Table 6. Comparative Payment Recapture Data for RRA and RUIA

Fiscal Year RRA RUIA

2017 $70.22 million $25.95 million

2016 $64.42 million $23.19 million

Source: RRB PAR for Fiscal Year 2018.

In our prior year audit report, we determined recaptured amounts for the RRA program was 

understated by an estimated $5.5 million, which consisted of unposted returned payments.26

 25 Palmetto GBA directly used the List of Excluded Individuals/Entities via a monthly data file emailed from CMS. 26 RRB Office of Inspector General (OIG), Audit of Railroad Retirement Board’s Compliance with the Improper 

Payments Elimination and Recovery Act of 2010 in the Fiscal Year 2017 Performance and Accountability Report, 

Report No. 18-05 (Chicago, IL: May 9, 2018).
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RRB Compliance with IPERA - Report No. 19-09 21

This occurred because the Bureau of Fiscal Operations provided the recaptured amounts to the 

Office of Programs for reporting purposes, but the Bureau of Fiscal Operations was unaware of 

the unposted returned payments. Our prior year audit recommendations remain open.

27

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 did not 

provide any justification for uncollectible RRA and RUIA amounts in its PAR. The RRB identified 

the estimated amount determined to be uncollectible at 24.9 percent for RRA and 19.3 percent

for RUIA. We consider both material.

According to OMB Circular No. A-136, an agency should describe a justification of any 

overpayments that have been determined not to be collectible in its PAR.

RRB management assumed that their compliance with the Debt Collection Improvement Act of 

1996 and previous IPERA reporting ensured compliance with this year’s uncollectible recapture 

reporting.28 We considered the Council of Inspectors General on Integrity and Efficiency’s 

October 2018 guidance for our evaluations of payment integrity reporting, which emphasized 

components of reporting other than the six compliance requirements.

By not providing the required information, the RRB did not comply with the transparency 

directed by OMB for the Congress and the public.

Non-Benefit Programs: Vendor and Employee Payments Recapture Program

The RRB did not conduct a cost benefit analysis to determine if it could have a cost effective 

payment recapture program for vendor and employee payments. Instead, the RRB relied on a 

risk assessment in its determination of cost effectiveness. Furthermore, RRB management 

stated they notified OMB and the OIG auditors of their decision not to conduct a payment 

recapture program during the previous PAR reporting cycle.

According to Appendix C, an agency may consider the likelihood that identified overpayments 

will be recaptured and the likelihood that the expected recoveries will be greater than the costs 

incurred to identify and recover the overpayments in determining whether a payment 

recapture audit is cost effective. Additionally, Appendix C requires that

[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.

29

It is the RRB’s position that the vendor and employee risk assessments included a sufficiently 

detailed description. Therefore, a payment recapture program would not be cost effective for 

 27 RRB OIG, Report No. 18-05, Recommendations 2 and 3. 28 Pub. L. 104-134, 110 Stat. 1321–358 (1996). 29 OMB M-18-20.
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RRB Compliance with IPERA - Report No. 19-09 22

vendor and employee payments.30 However, qualitative factors used in risk assessments were 

designed to determine whether a program was susceptible to significant improper payments 

and not designed to determine whether a payment recapture program would be cost effective. 

Therefore, a risk assessment on its own is not sufficient justification as the agency has 

previously approved alternatives to the formal payment recapture programs in place for other 

programs that were deemed not susceptible to significant improper payments by their 

respective risk assessments (e.g. RRA and RUIA). By not conducting a cost benefit analysis or 

effectively communicating its intent, the RRB did not comply with the transparency directed by 

OMB for the Congress and the public.

Recommendations

We recommend that the Office of Programs

10. 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; and

11. identify, publish, and provide a justification for Railroad Medicare uncollectible 

amounts.

We recommend that the Bureau of Fiscal Operations

12. provide justification for Railroad Retirement Act and Railroad Unemployment Insurance 

Act uncollectible amounts;

13. develop a payment recapture audit program for vendor and employee payments, or 

approved alternative method, if one is deemed cost effective; and

14. 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 Appendix C, 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.

Management’s Comments and Our Response

The Office of Programs did not concur with recommendations 10 and 11. Their response was 

the same as their response to recommendations 1 and 2. Our evaluation of their comments is 

also the same. Please refer to our comments for those recommendations.

For recommendations 12, 13, and 14, the Bureau of Fiscal Operations concurred with our 

recommendations.

 30 The RRB deemed vendor and employee payments not susceptible to significant improper payments in its 

fiscal year 2017 PAR.
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RRB Compliance with IPERA - Report No. 19-09 23

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 or late. We discussed our findings in reference to improper 

payment barriers, improper payment accountability, and relief from annual reporting request in 

the sections below.

Improper Payment Barriers

In the fiscal year 2018 PAR, RRB has described the internal controls, human capital, information 

systems, and other infrastructure it needs to reduce improper payments to the levels RRB has 

targeted. However, the RRB did not describe statutory or regulatory barriers that could limit 

corrective actions for RM.

When the fiscal year 2018 PAR was published, RRB management did not believe there were any 

statutory or regulatory barriers limiting the agency's corrective actions to reduce RM improper 

payments. During the audit, RRB management changed its position and now believes CMS is a 

barrier to implementing corrective actions. RRB management stated that CMS controls 

Medicare, limits RRB’s corrective actions, and controls RM funding. Going forward, RRB 

management stated they would document CMS as a barrier.

For all programs and activities with improper payments exceeding the statutory thresholds 

listed in Appendix C, agencies may describe any statutory or regulatory barriers, which may 

limit the agency’s corrective actions in reducing improper payments and actions taken by the 

agency to mitigate the barriers’ effects.

31

Because the RRB did not describe barriers that could limit corrective actions for RM, OMB may 

not realize the implications that may impede the RRB from achieving a gross improper payment 

rate of less than 10 percent for RM.

Improper Payment Accountability

RRB has no specific performance appraisal criteria for its employees to reduce improper 

payments for the RM program. OMB Circular A-136 requires that

[f]or all programs and activities as determined under OMB Circular A123, Appendix C, 

Part I.D with IPs [improper payment] exceeding the statutory thresholds listed in OMB 

Circular A-123, Appendix C, Part I.B., agencies shall describe the steps the agency has 

taken and plans to take (including timeline) to ensure that agency managers 

(including the agency head), accountable officers, program official/owner, and States 

and localities (where appropriate) are held accountable for reducing and recapturing 

IPs through annual performance appraisal criteria. Specifically, they should be held 

 31 Throughout OMB Circular No. A-136, the terms “must,” “shall,” and “will” denote a requirement that 

management must comply with in all cases; the term “should” denotes a presumptively mandatory requirement 

that applies except in circumstances where the requirement is not relevant for the agency; and “may” and “could” 

denote best practices that may be adopted at the discretion of management.
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RRB Compliance with IPERA - Report No. 19-09 24

accountable for meeting applicable IPs reduction targets and establishing and 

maintaining sufficient internal controls (including an appropriate control 

environment) that effectively prevents IPs from being made and promptly detects and 

recaptures any IPs that are made.

Office of Programs management stated they could not hold employees responsible for reducing 

improper payments when they have no control over RM funding. RRB relies on CMS to be 

reimbursed for expenditures to fund the RM program. During our audit, Office of Programs 

management stated that their position on our findings (for RM payment integrity reporting) 

was that CMS owns Medicare and the CERT program and the RRB is not responsible for either.

We explained this requirement could apply to any of the five programs and should be 

considered for future payment integrity reporting. Office of Programs officials identified a 

timing issue for fiscal year 2018 employee performance plans that would not have allowed time 

to incorporate OMB changes to its “Accountability” section in Appendix C, which now requires 

that appropriate individuals have performance appraisal criteria for reducing and recapturing 

improper payments. This requirement first appeared in OMB Circular No. A-136, dated 

August 15, 2017.

RRB participates in an annual OMB conference call to receive updates on significant changes to 

ensure applicable employees are up-to-date on the current standards. RRB management did 

not implement a control process to ensure all OMB updates were sufficiently addressed in the 

PAR.

As a result, RRB RM managers and employees did not have appraisal incentives to enact 

corrective actions to reduce improper payments. Therefore, improper payments could continue 

in the future, as individuals with primary oversight responsibilities are not adequately held 

accountable as the OMB guidance intended.

Relief from Annual Reporting

The RRB obtained relief for improper payment reporting for RRA and RUIA programs on 

July 19, 2018. Even though the request was approved, it was made late on July 6, 2018. 

According to OMB’s M-18-20, the fiscal year 2018 relief request should have been submitted to 

OMB by March 31, 2018.

We took into consideration that OMB published OMB M-18-20 on June 26, 2018 and may have 

contributed to RRB’s late request. However, we determined that prior OMB improper payment 

reporting guidance required the relief request to be submitted no later than June 30, 2018. 

Additionally, Office of Programs explained that they initially reached out to the OIG on 

May 24, 2018 to share their request for reporting relief and received OIG feedback on 

June 25, 2018. Office of Programs management informed OIG auditors that the deadline for 

submitting a request for relief was June 30, 2018.

Prior OMB guidance required OIG concurrence but current guidance stated the requests may 

be submitted without assertion from the agency’s OIG, if the agency notes the reason(s) the 

OIG would not provide an assertion.
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RRB Compliance with IPERA - Report No. 19-09 25

Recommendations

We recommend that the Office of Programs

15. 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;

16. 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; and

17. develop and implement an internal control process (e.g. a checklist) to ensure all 

updates to Appendix C and Office of Management and Budget Circular A-136 relating to 

improper payments are sufficiently addressed for payment integrity reporting.

Management’s Comments and Our Response

The Office of Programs did not concur with our recommendations.

The Office of Programs response for recommendations 15 and 16 were the same as their 

response to recommendations 1 and 2. Our evaluation of their comments is also the same. 

Please refer to our comments for those recommendations.

For recommendation 17, the Office of Programs stated,

[t]he Office of Programs maintains ongoing awareness of potential changes to 

Appendix C and Circular A-136 relating to improper payments by reading drafts and 

providing comments (as needed) directly to OMB. In addition, we participate in the 

OMB’s Town Hall meetings which specifically address changes to these Circulars. 

Lastly, final versions of Appendix C and Circular A-136 are disseminated to Program’s 

staff.

OIG disagrees with the sufficiency of the actions described as our report identified additional 

deficiencies in completeness of improper payment reporting. Please see the section earlier in 

this report titled “Incomplete Improper Payment Information and Data for the Railroad 

Medicare Program.”

The intent of the recommendation is to ensure the Programs’ staff sufficiently identify, 

consider, and address any changes of improper payment law or updates to applicable guidance. 

A checklist or similar control may adequately address the recommendation. Although the 

actions described may have occurred, they did not help the RRB identify the changes to 

improper payment reporting requirements.
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Other Observations

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

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

observations in the next sections.

Railroad Medicare Payment Reporting Data Does Not Coincide with 

Fiscal Year 2018

The RRB’s RM data was approximately two years old in the fiscal year 2018 PAR because RM 

data was based on claims sampled between July 2015 and June 2016 for its payment reporting. 

The primary report published, which contained such analysis, is titled “November 2017 Final 

Report for Contractor RRB” as of October 12, 2017. CMS provided RRB with this report after 

November 15, 2017 and after the publication of the fiscal year 2017 PAR. Therefore, the RRB 

used the analysis in its fiscal year 2018 PAR. This occurred even though approximately 

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

According to Appendix C,

[t]o the extent possible, data used for estimating improper payments in a given 

program should coincide with the fiscal year [FY] being reported (for example, the 

estimate reported in the FY 2018 AFR or PAR would be based on data from FY 2018). 

However, agencies may utilize a different 12-month reporting period with approval 

from OMB. This request for approval should be submitted to OMB no later than 

June 30 in the fiscal year for which the estimate is being reported and should be 

documented in responses to OMB data requests and/or in the AFR or PAR. For 

example, the estimate reported in the FY 2018 AFR or PAR could be based on data 

from FY 2017, if approved by OMB.

As another example, the estimate reported in the FY 2018 AFR or PAR could be based 

on data from the last two quarters of FY 2017 and the first two quarters of FY 2018, if 

approved by OMB. For consistency purposes, the agency should continue using the 

same time period for subsequent reporting years, unless a different time period is 

proposed by the agency and approved by OMB. Therefore, agencies do not need to resubmit a request for approval every year, only when they are planning to change their 

reporting time period.

32

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 between July 2016 and June 2017 and not 

the two year old sampling like the RRB. According to CMS, they focused on the overall Medicare 

payment integrity reporting results for their agency first. CMS explained they provided RRB 

(Palmetto GBA) with the results after November 15, along with the other Medicare 

Administrative Contractors. During our audit, Office of Programs management stated their 

position on our findings (for RM payment integrity reporting) was that CMS owns Medicare and 

the CERT program and the RRB is not responsible for either.

 32 OMB M-18-20.
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The RRB’s use of RM data that did not coincide with fiscal year 2018 directly and indirectly 

effects the RRB’s ability to 1) prevent improper payments from being made, 2) obtain a 

statistically valid and rigorous plan, 3) implement relevant corrective action, and 4) obtain a 

gross improper payment rate of less than 10 percent in a timely manner.

Recommendation

18. We recommend that the Office of Programs 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.

Management’s Comments and Our Response

The Office of Programs did not concur with our recommendation and their response for 

recommendation 18 was the same as their response to recommendations 1 and 2. Our 

evaluation of their comments is also the same. Please refer to our comments for those 

recommendations.

The Sampling and Estimation Plan was Not Optimal

The RRB did not ensure the RM’s sampling and estimation plan was at the optimal level, which 

is statistically valid and rigorous. Improper Payments Elimination and Recovery Improvement

Act of 2012 requires that all improper payment estimation plans be statistically valid. OMB 

categorizes sampling plans into three groups from best to worst. They are statistically valid and 

rigorous, statistically valid, or non-statistically valid.

We determined the RM plan was statistically valid but not statistically valid and rigorous. In 

order for a plan to be statistically valid and rigorous, it must have a +/-3 percent or better 

margin of error at the 95 percent confidence level for the improper payment percentage 

estimate. RM’s plan contained a +/-5 percent margin of error at the 95 percent confidence 

level. If an agency has anything but a statistically valid and rigorous plan, OMB directs such 

agencies to work towards improving their plans to meet the requirements for statistically valid 

and rigorous plans.

Given the publication date of OMB M-18-20 compared to the timeframe RRB prepared its 

payment integrity section, we reviewed prior OMB guidance to determine if the RM plan’s 

precision rate would have been acceptable in relation to the actual timeframe of the sampling 

data. In this comparison, it was actually worse. The plan would have been out of compliance 

and not considered statistically valid. Prior guidance allowed for 90 percent confidence interval 

of +/-2.5 percent or the use of a 95 percent confidence interval of +/-3 percent around the 

estimate of the dollar amount of improper payments. It also encouraged agencies to increase 

samples above the minimum to achieve greater precision.
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The RRB relied on CMS’ CERT sampling methodology and estimation plan without complete 

examination. The RRB did not determine the impact on RM’s improper payment rate, sampling 

and estimation plan, or precision target at the time of implementation. During our audit, Office 

of Programs management stated their position on our findings (for RM payment integrity 

reporting) was that CMS owns Medicare and the CERT program and the RRB is not responsible 

for either.

This resulted in 144 claims out of approximately 9 million being sampled for RM. A sample size 

of 144 claims did not meet the OMB requirement of +/-3 percent precision level with 

95 percent confidence interval. Additionally, compliance with the future reduction target 

depends on the program or activity’s sampling and estimation plan type. For example, if the 

RRB had a statistically valid plan then the reduction target would count as being met only if 

their estimated improper payment rate is lower than or equal to the reduction target. 

Conversely, if the RRB had a statistically valid and rigorous plan then the reduction target would 

count as being met if the confidence interval includes the reduction target.

Please refer to the section earlier in this report titled “Incomplete Improper Payment 

Information and Data for the Railroad Medicare Program” for details concerning the RRB’s 

incomplete RM sampling and estimation plan.

Recommendation

19. We recommend that the Office of Programs and the Office of Administration work 

together to 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.

Management’s Comments and Our Response

The Offices of Programs and Administration did not concur with our recommendation. 

The Offices of Administration and Programs response for recommendation 19 was the same as 

their response to recommendations 1 and 2. Our evaluation of their comments is also the 

same. Please refer to our comments for those recommendations.

In respect to this finding, OIG believes that it is reasonable to collaborate with CMS and update 

the MOU governing the relationship between the RRB and CMS in order to make a clear 

distinction regarding responsibilities as they pertain to improper payment laws. This MOU was 

executed before the RM program was determined to be susceptible to improper payments.
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APPENDIX I: MANAGEMENT COMMENTS
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OFFICE OF INSPECTOR GENERAL - RAILROAD RETIREMENT BOARD

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APPENDIX II: MANAGEMENT COMMENTS
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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 Payments Elimination and Recovery Act

requirements. (Recommendation 2)

Open

15-06 Revise and document their definitions of improper 

underpayments for the Railroad Retirement Act program in 

compliance with Improper Payments Elimination and 

Recovery Act 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 

auditors that this 

recommendation should be 

directed to another 

organization with the 

agency.

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 Office 

of Inspector General 

auditors that this 

recommendation should be 

directed to another 

organization with the 

agency.
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Railroad Retirement Board 

Office of Inspector General Audit Reports

Report Recommendation Status

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. 

Office of Inspector General 

auditors believe that 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 

systems. (Recommendation 2)

Open

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 Payments Elimination and Recovery Act guidance.

(Recommendation 3)

Open

Agency did not concur. 

Office of Inspector General 

auditors believe that 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. 

Office of Inspector General 

auditors believe that 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. 

Office of Inspector General 

auditors believe that this 

recommendation should still 

be implemented.

18-05 Strengthen the Railroad Retirement Act program quality 

assurance preparation and review process to ensure the 

accuracy of reported improper payment data. 

(Recommendation 1)

Open

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
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APPENDIX IV: ABBREVIATIONS

AFR Agency Financial Report

Appendix C Appendix C to OMB Circular A-123, Requirements for Payment integrity 

Improvement, OMB M 18 20

CERT Comprehensive Error Rate Testing

CFO Chief Financial Officer

CMS Centers for Medicare and Medicaid Services

DNP Do Not Pay Initiative

ERM Enterprise Risk Management

HHS U.S. Department of Health and Human Services

IPERA Improper Payments Elimination and Recovery Act of 2010

LEIE List of Excluded Individuals and Entities

MOU Memorandum of Understanding

OIG Office of Inspector General

OMB Office of Management and Budget

PAR Performance and Accountability Report

RM Railroad Medicare

RRA Railroad Retirement Act

RRB Railroad Retirement Board

RUIA Railroad Unemployment Insurance Act

SMAC Specialty Medicare Administrative Contractor