Improper Payments: CFO Act Agencies Need to Improve Efforts to Address Compliance Issues
Published: 2016-06-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: IPERA calls for executive branch agencies' IGs to annually determine whether their agencies complied with six criteria related to the estimation of improper payments, including conducting risk assessments, publishing corrective action plans, and meeting annual reduction targets. In the last 2 fiscal years, total estimated improper payments reported by federal agencies have increased considerably. Specifically, improper payment estimates across the government for fiscal year 2015 totaled $136.7 billion, over $30 billion higher than the estimated total for fiscal year 2013.
GAO was asked to review compliance under IPERA as reported by IGs for fiscal year 2014. This report examines to what extent the 24 CFO Act agency IGs (1) reported that agencies complied with the IPERA criteria for fiscal years 2011 through 2014, and what criteria and programs were responsible for agency noncompliance; (2) reported programs to be noncompliant for 3 consecutive years as of fiscal year 2014, and whether agencies submitted the required information to Congress; and (3) adhered to statutory requirements and OMB guidance for reporting on fiscal year 2014 IPERA compliance reviews.
section_title: What GAO Found
paragraphs: For fiscal year 2014, 15 of the 24 Chief Financial Officers Act (CFO Act) agency inspectors general (IG) determined that their agencies did not comply with criteria in the Improper Payments Elimination and Recovery Act of 2010 (IPERA). This is the largest number of CFO Act agencies reported as noncompliant under IPERA since the requirement for IGs to report on their agencies' compliance was implemented in fiscal year 2011, and represents an increase of 4 agencies from fiscal year 2013. In fiscal year 2014, IGs reported 38 programs accounting for $100.6 billion in estimated improper payments as responsible for instances of noncompliance. Agency noncompliance for fiscal year 2014 was largely due to agencies failing to meet improper payment reduction targets or to report improper payment error rates at less than 10 percent for all programs. If the 5 agencies with programs exceeding 10 percent error rates had reported error rates under the threshold set in IPERA, the government-wide improper payment estimate would have been $23.1 billion, or 18.6 percent, lower.
In addition, 18 programs at 9 agencies were reported as noncompliant with IPERA criteria by their agencies' IGs for at least 3 consecutive years as of fiscal year 2014. Agencies with programs reported as noncompliant for 3 consecutive years are required to submit proposals to Congress to reauthorize the programs or change the statutes that established them. However, GAO found that only 3 agencies submitted such information to Congress. When agencies do not report to Congress as required, Congress is limited in its ability to monitor the implementation of IPERA and ensure that its intent is being fulfilled.
Certain IGs also did not fully adhere to Office of Management and Budget (OMB) guidance or statutory requirements for IPERA reporting for fiscal year 2014 by either failing to (1) clearly state the agency's compliance status overall and with each of the six criteria, (2) report on programs designated high priority by OMB as necessary, or (3) report compliance determinations for disaster relief programs. In the past year, OMB has made efforts to clarify its guidance to IGs. To determine if IGs made changes in response to OMB's efforts and deficiencies identified in GAO's preliminary findings shared with them, GAO reviewed select fiscal year 2015 IPERA reports issued by IGs in May 2016. GAO concluded that the IGs corrected the issues identified during this review in their fiscal year 2015 IPERA reports, and no recommendations to IGs are warranted.
section_title: What GAO Recommends
paragraphs: GAO recommends that four agencies submit proposals as required to Congress in response to 3 years of noncompliance with IPERA criteria. The Departments of Defense and Transportation concurred with GAO's recommendations and the Department of Agriculture and the Small Business Administration stated that they had no comments on the draft report.

section_title: Letter
paragraphs: Improper payments—payments that should not have been made or were  made in incorrect amounts—have presented a continuing challenge to the  fiscal position of the federal government and have been estimated to total  over $1 trillion government-wide since 2003. In the last 2 fiscal years,  total estimated improper payments at federal agencies have increased  considerably. Specifically, improper payment estimates across the federal  government for fiscal year 2015 totaled $136.7 billion, over $30 billion  higher than the estimated total for fiscal year 2013.
For several years, GAO has reported that the federal government is  unable to determine the full extent to which improper payments occur and  reasonably ensure that actions are taken to reduce them. Given the  significant increase in estimated improper payments in recent years,  additional efforts are needed to help ensure that federal agencies and  inspectors general (IG) monitor individual programs’ improper payment  rates. Annual reports prepared by the IGs assessing agencies’  compliance under the Improper Payments Elimination and Recovery Act  of 2010 (IPERA), which are the focus of this review, play a pivotal role in  this effort.
We previously reported on agency compliance under IPERA for fiscal  year 2013. We were asked to provide an update on the analysis  contained in that report to include fiscal year 2014 data, as well as assess  the extent to which IGs have complied with newly issued guidance in  Office of Management and Budget (OMB) Circular No. A-123, Appendix  C. This report discusses (1) the number of agencies, among those listed  in the Chief Financial Officers Act of 1990, as amended (CFO Act), that  complied with the criteria listed in IPERA, as reported by their IGs, for  fiscal years 2011 through 2014, and what criteria and programs the IGs  concluded were primarily responsible for instances of agency  noncompliance; (2) the number of programs at the 24 CFO Act agencies  that were determined noncompliant under IPERA by their IGs for 3 or  more consecutive years as of fiscal year 2014, and the extent to which  the responsible agencies submitted the required information to Congress;  and (3) the extent to which CFO Act agency IGs adhered to certain  IPERA requirements and the related OMB guidance in their fiscal year  2014 improper payment compliance reviews, including reporting on  certain disaster relief appropriations and OMB-designated high-priority  programs.
To determine the number of CFO Act agencies (hereafter referred to as  agencies) compliant or noncompliant with the criteria in IPERA, as  reported by their IGs for fiscal years 2011 through 2014, we reviewed  reports prepared annually by the CFO Act agency IGs (hereafter referred  to as IGs) and summarized their findings and conclusions. We also  determined the programs responsible for noncompliance over this period  by analyzing and summarizing the determinations made in the IG reports.  Additionally, we reviewed the improper payments reporting contained in  the agencies’ fiscal year 2014 agency financial reports (AFR) and  performance and accountability reports (PAR) and corroborated our  findings with OMB and the IGs.
To determine the number of programs deemed noncompliant by their  agencies’ IGs as of fiscal year 2014 for consecutive years, we  summarized IG determinations made in annual compliance reports  prepared by the IGs dating back to fiscal year 2011 and also corroborated  our findings with OMB and the IGs. To determine if agencies overseeing  these noncompliant programs have submitted the required information to  Congress, we interviewed and reviewed supporting documentation from  the offices of chief financial officer at relevant agencies.
To assess the extent to which IGs have adhered to OMB guidance for  fiscal year 2014 reporting, we reviewed the compliance reports prepared  annually by the IGs and compared the structure and content to that  required by OMB Circular No. A-123, Appendix C. We also reviewed the  agencies’ improper payments reporting contained in the AFRs and PARs  for fiscal year 2014 to help ensure that certain IPERA criteria were met  and that the IG determination for compliance for each criterion agreed to  our observations. In each fiscal year 2014 agency AFR or PAR, we were  able to assess whether the following criteria in Section 3 of IPERA were  met for each program determined to be at risk for significant improper  payments: (1) published corrective action plans, (2) published and met  annual reduction targets, and (3) reported a gross improper payment  estimate of less than 10 percent. We determined that the conclusions in  the IGs’ reports were sufficiently reliable for our reporting purposes.
We conducted this performance audit from September 2015 to June 2016  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. Appendix I provides additional  information on our scope and methodology.
subsections: section_title: Background
paragraphs: In November 2002, Congress passed and the President signed the  Improper Payments Information Act of 2002 (IPIA), which was later  amended by IPERA and the Improper Payments Elimination and  Recovery Improvement Act of 2012 (IPERIA). IPIA, as amended,  requires federal executive branch agencies to (1) review all programs and  activities and identify those that may be susceptible to significant  improper payments, (2) estimate the annual amount of improper  payments for susceptible programs and activities, (3) implement actions  to reduce improper payments and set reduction targets, and (4) report on  the results of addressing the foregoing requirements.
Section 3 of IPERA also calls for executive agencies’ IGs to annually  determine and report on whether their respective agencies complied with  the following six criteria: publish a report in the form and content required by OMB—typically  an AFR or a PAR—for the most recent fiscal year, and post that report  on the agency website;  conduct a program-specific risk assessment for each program or  activity that conforms with IPIA as amended; publish improper payment estimates for all programs and activities  deemed susceptible to significant improper payments under the  agency’s risk assessment; publish corrective action plans for those programs and activities  assessed to be at risk for significant improper payments; publish and meet annual reduction targets for all programs and  activities assessed to be at risk for significant improper payments; and  report a gross improper payment rate of less than 10 percent for each  program and activity for which an improper payment estimate was  published.
OMB plays a key role in overseeing the implementation of improper  payments legislation. OMB is directed by statute to provide guidance to  federal agencies on estimating, reporting, reducing, and recovering  improper payments, and has also issued guidance to agencies on  improving improper payment estimates as required by IPERIA.
In October 2014, OMB issued new guidance on improper payments that  changed certain requirements for fiscal year 2014 reporting, such as  extending the reporting period for IG IPERA reports and also eliminating  an additional criterion for IGs to assess whether agencies have reported  on efforts to recapture improper payments. Per this guidance, an  agency’s IG is required to submit a report on its assessment of the  agency’s compliance with the criteria listed in IPERA, as applicable, to the  head of the agency, the Senate Committee on Homeland Security and  Governmental Affairs, the House Committee on Oversight and  Government Reform, the Comptroller General, and the OMB Controller  within 180 days of the publication of the agency’s annual PAR or AFR.
IPERA states that if an IG reports that an agency is not in compliance  with any of the IPERA criteria for 1 fiscal year, the agency head must  submit a plan to appropriate congressional committees and OMB  describing the actions that the agency will take to come into compliance.  If an agency is found noncompliant with respect to the same program for  2 consecutive years, IPERA directs OMB to review the program and  determine if additional funding would help bring the program into  compliance and, if so, directs the agency to use any available  reprogramming or transfer authority, or request further reprogramming or  transfer authority from Congress, to aid in the program’s remediation  efforts. For programs determined to be noncompliant for more than 3  consecutive years, the agency is required by IPERA to submit to  Congress within 30 days of the IG’s report either (1) a reauthorization  proposal for the program or (2) proposed statutory changes necessary to  bring the program or activity into compliance. In addition, OMB’s  guidance stipulates that OMB may require agencies that are  noncompliant to complete additional requirements. For example, OMB  could require that the agency re-evaluate or re-prioritize its corrective  actions, intensify and expand existing corrective action plans, or  implement or pilot new tools and methods to prevent improper payments.
OMB is required to annually identify a list of high-priority federal programs  in need of greater oversight and review. In general, OMB has  implemented this requirement by designating high-priority programs  based on a threshold of $750 million in estimated improper payments for  a given year. OMB guidance directs IGs at executive branch agencies  with high-priority programs, as part of their annual compliance reviews, to  (1) evaluate the agency’s assessment of risk level and quality of the  improper payment methodology for estimation; (2) determine the extent of  oversight needed; and (3) provide the agency with recommendations, as  necessary, for improving its methodology, internal controls, or level of  program access and participation.
In addition to the laws and guidance noted above, the Disaster Relief  Appropriations Act, 2013 requires that all programs receiving funds  appropriated by that act be deemed susceptible to significant improper  payments, which consequently requires the agencies responsible for  these programs to estimate improper payments, implement corrective  actions, and report on their results for these programs.
section_title: IGs Reported a Decrease in Compliance with IPERA Criteria Caused Primarily by Agencies’ Failure to Meet Improper Payment Reduction Targets
paragraphs: For fiscal year 2014, 15 of the 24 CFO Act agency IGs reported their  agencies as noncompliant with one or more of the IPERA Section 3  criteria. This is the largest number of agencies deemed noncompliant  under IPERA since IGs began reporting on their agencies’ compliance  with these criteria in fiscal year 2011. Further, this represents an increase  of 4 agencies reported to be noncompliant compared to fiscal year 2013.
A total of 38 programs accounting for a reported $100.6 billion in  estimated improper payments were responsible for identified instances of  noncompliance in fiscal year 2014. Figure 1 summarizes agencies’  reported compliance by IPERA criterion for fiscal year 2014.
Based on our review of IG IPERA reports for fiscal year 2014, we found  that the causes for noncompliance most commonly reported were related  to the IPERA provisions regarding publishing and meeting planned  improper payment reduction targets and reporting improper payment error  rates below 10 percent. Specifically, 12 of the 24 CFO Act agencies did  not meet one or both of these criteria. These results are similar to those  reported by the IGs in fiscal year 2013. The reports also showed that  most agencies complied with other IPERA criteria, such as publishing  required information in a PAR or AFR and publishing corrective action  plans for relevant programs. Table 1 displays each agency’s compliance  status for each IPERA criterion, as reported by its IG, for fiscal year 2014.
subsections: section_title: Eleven Agencies Did Not Meet or Publish Improper Payment Reduction Targets for 29 Programs
paragraphs: The most common reason for reported noncompliance under IPERA in  fiscal year 2014, as in fiscal year 2013, was the failure to publish and  meet annual improper payment reduction targets. Eleven agencies did  not meet this criterion in fiscal year 2014. Specifically, 10 agencies  published reduction targets but failed to meet them, and 1 agency—the  Department of Labor (DOL)—failed to comply because it did not publish  an improper payment reduction target rate for its Unemployment  Insurance benefit program. DOL IG reported that the agency did not  publish an annual reduction target for this program because DOL was  awaiting additional guidance and consultation regarding estimation  methodology with OMB. Other IGs reported that factors affecting  compliance with this criterion included challenges in maintaining  adequate and complete supporting documentation and conducting  adequate reviews. For example, IGs at the U.S. Department of  Agriculture (USDA), the Department of Health and Human Services  (HHS), and the General Services Administration (GSA) reported that  administrative errors, documentation errors, or both prevented the  agencies from meeting their reduction targets.
USDA, HHS, the Department of Defense (DOD), and the Department of  Transportation (DOT) IGs reported that factors such as mistakes in  completing vouchers, inadequate reviews before payment, lack of grantee  awareness of documentation requirements, and difficulty complying with  new requirements in legislation contributed to these agencies not meeting  their reduction targets. HHS reported that new legislative requirements for  its Medicare Fee-for-Service and Medicaid programs contributed to the  programs’ noncompliance. The USDA IG also reported that a flawed  sampling method for USDA’s Federal Crop Insurance Corporation  Program Fund resulted in its failure to meet its reduction target because  one program component reported a 27 percent error rate. Anomalies in  samples for the Department of Veterans Affairs (VA) Veterans Health  Administration’s Civilian Health and Medical Program were considered by  the agency to be the cause for noncompliance in meeting reduction  targets because such sampling issues disproportionately skewed  improper payment error rates upwards.
IG reports also indicated that an agency’s failure to meet reduction  targets may not necessarily suggest that the agency was not adequately  monitoring its programs’ improper payments. For example, the VA, Small  Business Administration (SBA), and USDA IGs reported increases in  improper payment error rates because of factors such as improved  sampling and emphasis on training, which enhanced their agencies’  ability to detect improper payments. Six of the 11 agencies whose IGs  reported noncompliance with the criterion to publish or meet reduction  targets have no reported noncompliance with the other IPERA criteria.
section_title: Five Agencies Reported Improper Payment Error Rates Exceeding 10 Percent for 10 Programs
paragraphs: The second most common reason for noncompliance under IPERA, as  reported by IGs for fiscal year 2014, was agencies’ inability to report  improper payment error rates for all programs below 10 percent—a  threshold which five CFO Act agencies did not meet for at least one of  their programs or activities. Of the 119 programs at CFO Act agencies  reporting $124.5 billion of estimated improper payments for fiscal year  2014, a total of 10 programs reported improper payment error rates of  greater than 10 percent. Had these programs decreased their reported  error rates to 10 percent, the government-wide improper payment  estimate would have been $23.1 billion, or 18.6 percent, lower. This  potential reduction is largely accounted for by 2 programs—the  Department of the Treasury’s (Treasury) Earned Income Tax Credit  (EITC) and HHS’s Medicare Fee-for-Service. If EITC and Fee-for-Service  reported error rates at the 10 percent threshold, the fiscal year 2014  government-wide improper payment estimate would be lowered by  $11.18 billion and $9.74 billion, respectively.
Agencies’ IGs reported that factors affecting compliance with this criterion  included challenges in complying with documentation requirements and  administrative and documentation errors. For example, USDA and HHS  IGs reported that administrative and documentation errors in processing  payments prevented these agencies from reporting improper payment  error rates below the 10 percent threshold. USDA IG also reported that  additional payment testing criteria increased the error rate, and HHS IG  reported that the provider community experienced issues in complying  with certain documentation requirements for some services. Table 2  summarizes agency programs that reported error rates above the 10  percent threshold for fiscal year 2014.
Although the 10 percent threshold was not achieved by 10 programs,  some programs in this category still reported improvements in fiscal year  2014. For example, the SBA IG reported that even with the agency’s  Disaster Assistance Loans program’s error rate exceeding the 10 percent  threshold, the agency reduced the program’s error rate from 18.4 percent  in fiscal year 2013 to 12.0 percent in fiscal year 2014. Reported factors  that helped improve SBA’s error rate included multilayer payment reviews  and improved staff training.
section_title: From Fiscal Year 2011 to Fiscal Year 2014, IGs Reported Some Improvements but Ultimately Reported a Decline in the Total Number of Agencies Compliant with IPERA Criteria
paragraphs: According to the fiscal year 2014 IG IPERA reports, overall agency  compliance with IPERA criteria has reached its lowest point since IGs  began annual reporting. Specifically, in fiscal year 2011—the first year of  reporting—14 agencies did not comply with at least one of the IPERA  criteria. While the number of agencies reported noncompliant actually  improved in fiscal years 2012 and 2013, decreasing to 12 and 11  agencies, respectively, IGs reported an increase in agency  noncompliance to 15 agencies in fiscal year 2014. Consequently, IGs  reported the greatest number of noncompliant agencies in fiscal year  2014. Figure 2 summarizes the number of CFO Act agencies  noncompliant under IPERA each year since fiscal year 2011, as reported  by their IGs, and table 3 details individual agencies’ compliance with  IPERA criteria, as reported by their IGs, for fiscal years 2011 through  2014.
IG reports showed areas where agency compliance has remained a  challenge throughout the years. For example, noncompliance with the  criteria to publish and meet annual reduction targets has been at the  same level over the 4 years since IPERA was implemented; 11 agencies  did not comply with this criterion in each year. Some programs, such as  USDA’s School Breakfast and Special Supplemental Nutrition Program  for Women, Infants, and Children programs, have not met their reduction  targets for each of the last 4 years. Treasury’s EITC program has also  reported error rates among the highest in the government, ranging from  22.7 to 27.2 percent since fiscal year 2011. The number of agencies that  have been noncompliant with the 10 percent criterion has been 5 or more  for each fiscal year.
Another criterion with which agency noncompliance increased in fiscal  year 2014 was the requirement to publish estimates for all programs  deemed susceptible to significant improper payments. Specifically, 4  agencies’ IGs determined that their agencies did not comply with this  requirement—Department of the Interior (DOI), VA, USDA, and HHS. The  first three IGs determined that certain programs did not have complete,  accurate, or reliable improper payment estimates for at least one  program, while HHS was unable to publish an estimate for its Temporary  Assistance for Needy Families program (TANF) for the fourth year in a  row, reportedly because of statutory limitations that prevent HHS from  requiring states that administer the program to participate in improper  payment measurement.
While the increase in agency noncompliance with some criteria  contributed to the increasing number of noncompliant agencies reported,  there were also improvements in compliance with other criteria. For  example, in fiscal year 2011, five IGs reported that their agencies did not  publish corrective action plans; in fiscal year 2014, only one IG—HHS— reported that its agency did not publish necessary corrective action plans.  IGs also noted further improvements in the criteria for agencies to  conduct risk assessments for all programs susceptible to significant  improper payments. In fiscal year 2011, five IGs reported that their  agencies did not fulfill the requirement to conduct program-specific risk  assessments; in fiscal year 2014, only three IGs reported that their  agencies were noncompliant. Figure 3 shows cumulative CFO Act agency  compliance by IPERA criterion for fiscal years 2011 through 2014.
section_title: Eighteen Programs Were Noncompliant with IPERA Criteria for 3 Consecutive Years or More, as of Fiscal Year 2014, and Some Agencies Did Not Submit Information Required to Address Consecutive Noncompliance
paragraphs: IGs at nine CFO Act agencies determined that 18 programs were  noncompliant with IPERA criteria for at least 3 consecutive years as of  fiscal year 2014. When a program is reported as noncompliant by its IG  for 3 or more consecutive years, the responsible agency is required to  submit proposals to Congress within 30 days to reauthorize the program  or change the statute that established it. However, we found that only  three of the nine agencies submitted the required information to Congress  in response to 3 or more years of consecutive noncompliance in fiscal  year 2014.
subsections: section_title: Eighteen Programs at Nine Agencies Were Noncompliant with IPERA Criteria for 3 Consecutive Years or More, as of Fiscal Year 2014
paragraphs: As of fiscal year 2014, IGs reported that there were a total of 38 programs  determined to be noncompliant: 17 programs were noncompliant for 1  year, 3 programs noncompliant for 2 consecutive years, and 18 programs  were noncompliant for 3 consecutive years or more. Table 4 lists the CFO  Act agency programs determined by their agencies’ IGs to be  noncompliant with IPERA criteria for 3 or more consecutive years, as of  fiscal year 2014.
section_title: Three Agencies Submitted Information Required to Address Consecutive Years’ Noncompliance under IPERA in Fiscal Year 2014, but Others Did Not
paragraphs: As previously discussed, IPERA requires agencies that have been  deemed noncompliant with IPERA criteria for consecutive years to take  certain actions. If a program is found to be noncompliant by an agency’s  IG for more than 3 consecutive years with respect to the same program or  programs, the agency must submit to Congress within 30 days of such  determination a reauthorization proposal for each noncompliant program  or any proposed statutory changes it deems necessary to bring the  program into compliance. OMB guidance instructs agencies with “three or  more” years of reported noncompliance to submit this information,  thereby including those with exactly 3 years of reported consecutive  noncompliance. Additionally, OMB guidance states that agencies should  share these proposals or plans with their respective IGs.
Overall, we found that some agencies complied with these requirements  with varying degrees of detail, while others did not submit the required  information to Congress. These are detailed below.
subsections: section_title: Three Agencies Submitted Proposals to Congress to Reauthorize or Change the Statutes of Consistently Noncompliant Programs
paragraphs: Three agencies fulfilled the requirement in IPERA and the related OMB  guidance by submitting proposals for reauthorization or statutory change  to Congress, although they did not always submit them within the  required time frames. For example, when the Treasury IG reported in its  fiscal year 2013 report that the Internal Revenue Service’s EITC program  had been noncompliant with IPERA criteria each year since 2011  because it reported error rates exceeding 10 percent, the agency  submitted proposals to Congress in response. However, this action was  not taken until August 2014, surpassing the 30-day period for submission  that began in April 2014 when the Treasury IG issued its compliance  determination in its report. Although the agency fulfilled the requirement in  IPERA to submit legislative proposals to Congress, the Treasury IG  further recommended that the agency submit a more comprehensive plan  to Congress, including corrective actions to be implemented to correct  noncompliance in the EITC program. This plan was submitted to  Congress in June 2015.
DOL’s Unemployment Insurance program had first reached 3 consecutive  years of noncompliance in fiscal year 2013 and was again found to be  noncompliant in fiscal year 2014. After 3 consecutive years of  noncompliance for the program as of fiscal year 2013, DOL officials  stated that they began preparing a legislative package; however, this  package was never transmitted to Congress. When the agency’s  Unemployment Insurance program was deemed noncompliant for 4  consecutive years as of fiscal year 2014, DOL produced legislative  proposals and sent a letter to Congress, although its submissions also  surpassed the 30-day deadline following the IG’s report. Specifically, DOL  submitted a letter to Congress regarding Unemployment Insurance  improper payments on September 30, 2015, and submitted legislative  proposals to OMB in November 2015, which were later included in the  President’s Budget for fiscal year 2017 that was transmitted to Congress.
HHS accounted for two programs that were noncompliant with IPERA  criteria for 3 or more consecutive years as of fiscal year 2014: the  Medicare Fee-for-Service program and TANF. HHS submitted letters to  Congress containing legislative proposals and information on corrective  actions for both programs, and also stated that it is working with OMB to  develop an alternative approach for devising an improper payment  estimate for TANF, which has been unable to report an estimate in any  year because of statutory limitations that prevent HHS from requiring  states that administer the program to participate in improper payment  measurement.
section_title: Four Agencies Did Not Submit Proposals to Congress Because They Concluded That Reauthorization or Legislative Changes Were Not Necessary
paragraphs: Although IPERA and OMB guidance require agencies to submit proposals  for reauthorization or statutory changes after 3 consecutive years of a  program’s reported noncompliance with the act’s criteria, four agencies  did not do so because they concluded that reauthorization or legislative  changes were not necessary. We were told by certain agency officials  that implementing corrective actions at the agency level is the only way to  bring their programs into compliance under IPERA because legislative  provisions, in some cases, are not responsible for agencies failing to  meet the IPERA criteria. Additionally, we were told that reauthorization of  a program is not always practical or necessary for every program.
For example, USDA did not submit proposals to Congress for some of its  noncompliant programs because, according to agency officials, the time  frame established by statute for reauthorization did not coincide with the  requirement in IPERA to submit such proposals. For fiscal year 2014, the  USDA IG reported five programs at USDA as noncompliant with IPERA  criteria for 4 consecutive years. The IG recommended in its fiscal year  2014 report that three of these programs administered by USDA’s Food  and Nutrition Service (FNS)—the Child and Adult Care Food Program,  the National School Lunch Program, and the School Breakfast Program— submit proposals for legislative changes to Congress. The IG had  previously made this recommendation in its fiscal year 2013 report after  these programs were noncompliant for 3 consecutive years. Despite  USDA’s response at the time that it would issue guidance to its agencies  to comply with this recommendation, no proposals were submitted to  Congress. In its fiscal year 2014 response, FNS noted that its  opportunities to suggest reauthorization proposals for the National School  Lunch and School Breakfast programs are limited to times of  reauthorization, which occur every 5 to 6 years and may not coincide with  the timing of the IPERA requirement. FNS stated that it submits budget  proposals each year as part of USDA’s annual budget process, but some  of these proposals for fiscal year 2016 related to funding aimed at  reducing improper payments were not included in USDA’s final budget.  Further, FNS did not submit a reauthorization proposal for its Special  Supplemental Nutrition Program for Women, Infants, and Children in  response to 3 and 4 years of consecutive noncompliance in fiscal years  2013 and 2014, respectively, though the agency stated in its official  response to the IG’s fiscal year 2014 IPERA compliance report that it was  involved in reauthorization discussions with USDA.
USDA’s fifth program reported as noncompliant for 3 consecutive years in  fiscal year 2014—the Direct and Counter-Cyclical Payments program— was repealed by the February 2014 enactment of the Agricultural Act of  2014. Because this program is no longer authorized to receive  appropriations, the need for a reauthorization proposal no longer exists.
SBA officials stated that the agency also did not submit proposals for  reauthorization or statutory changes to Congress because its  noncompliant programs—7(a) Guaranty Loan Approvals and Disaster  Assistance Loans—are permanently authorized and thus do not require  reauthorization. Because of this, SBA officials told us, submitting  reauthorization proposals to Congress would be inapplicable and  unnecessary. The agency also noted that statutory changes were not  proposed for these programs because they would not reduce their  improper payment error rates or address the root causes for improper  payments. SBA officials stated that they consider corrective actions at the  agency to be the most appropriate solution to achieving IPERA  compliance in future years. The SBA IG further indicated that corrective  actions appeared to be effective at reducing improper payments for the  Disaster Assistance Loans program, resulting in the IG changing the  status of corrective actions to address its management challenge related  to the Disaster Assistance Loans program in fiscal year 2015 to  “implemented.”
Officials at DOT stated that the agency did not submit proposals for  reauthorization or statutory changes because such actions would not help  the agency achieve compliance with IPERA criteria for its Federal Transit  Administration Formula Grants program, which failed to meet its improper  payment reduction target for 3 consecutive years. The agency noted that  in its 2014 agency financial report, it did not identify any statutory or  regulatory barriers that would prevent the agency from implementing  corrective actions to reduce improper payments. Submitting a proposal  for reauthorization or statutory changes to the Formula Grants program  would appear to contradict this assessment and was unnecessary,  according to DOT.
DOD did not submit proposals for reauthorization or statutory changes to  Congress in response to 3 consecutive years of noncompliance in its  Travel Pay program as of fiscal year 2014. In its response to the IG’s  fiscal year 2014 IPERA compliance report, DOD officials stated that the  agency’s root causes of noncompliance are covered by existing internal  controls and regulations that management would ensure were  implemented and enforced. In December 2015, DOD issued an internal  memorandum addressing the need for internal controls and training  intended to reduce improper payments within the Travel Pay program,  rather than submitting proposals to Congress.
Although officials at some of the agencies maintain that reauthorization or  statutory change will not achieve compliance under IPERA, by not  reporting to Congress as required when an agency does not comply for 3  consecutive years and informing Congress of the agency’s challenges  with achieving compliance under IPERA, Congress is limited in its ability  to monitor the law’s implementation and ensure that its intent is being  fulfilled. Standards for Internal Control in the Federal Government also  states that management should ensure an adequate means of  communicating information that may have a significant impact on the  agency to external stakeholders.
section_title: Two Agencies Did Not Submit Proposals to Congress Because They Were Not Initially Reported by Their IGs as Noncompliant for 3 Consecutive Years
paragraphs: Two agencies—the Department of Homeland Security (DHS) and the  Social Security Administration (SSA)—were not initially required to submit  proposals for reauthorization or statutory changes to Congress in  response to fiscal year 2014 noncompliance because their respective IGs  initially did not report the agencies as noncompliant for 3 consecutive  years. Because the legal requirement to report to Congress is triggered  by the IG reporting noncompliance, rather than the noncompliance itself,  these two agencies are not subject to the congressional reporting  requirement until such time as each IG updates its determination. These  instances are detailed later in this report.
section_title: Certain IGs Did Not Fully Adhere to Statutory Requirements and OMB Guidance for IPERA Reporting for Fiscal Year 2014
paragraphs: We found that in conducting their IPERA compliance reviews for fiscal  year 2014, certain IGs did not consistently adhere to the requirements  contained in IPERA and other applicable laws, such as the Disaster Relief  Appropriations Act, 2013 as well as the guidance provided by OMB to  clarify IPERA criteria and establish reporting requirements for OMB- designated high-priority programs. Specifically, we found, for fiscal year  2014, that the IGs did not always determine compliance as required by  IPERA, summarize agency compliance as directed by OMB guidance,  assess their agencies’ high-priority programs in accordance with OMB  guidance, and report determinations of compliance for disaster relief  programs that reported improper payment estimates.
subsections: section_title: Five IGs Did Not Summarize Agency Compliance as Outlined in OMB Guidance
paragraphs: Based on our review of IG IPERA reports, we noted that five IGs did not  fully adhere to OMB’s guidance for conducting their IPERA compliance  reviews. As previously noted, OMB Circular A-123, Appendix C, contains  guidance for IGs to use in carrying out their reviews of agencies’ improper  payment information as required by IPERA. Specifically, this guidance  directs each agency IG’s IPERA report to include a high-level summary  toward the beginning of the report that (1) indicates which of the six  specific criteria contained in IPERA the agency did and did not comply  with and (2) clearly states the agency’s compliance status overall. In  accordance with IPERA, OMB’s guidance states that if an agency does  not meet one or more of the six IPERA criteria for any one or more of its  programs, it is considered noncompliant overall under IPERA. IPERA  does not support a finding of partial compliance by an IG. Table 5 lists the  instances in which IGs did not adhere to OMB’s implementing guidance  for high-level summaries in their fiscal year 2014 reports.
We found that 4 of the 24 IGs did not specify in their reports which of the  six IPERA criteria their agencies complied with and did not. Specifically,  IGs at DOI, the Department of State (State), GSA, and SSA did not fulfill  this requirement. For example, the GSA IG noted that GSA reported  inaccuracies in its fiscal year 2014 AFR information and did not complete  corrective actions from the previous year’s review, but it was unclear if  these instances resulted in determinations of compliance or  noncompliance with the IPERA criteria for publishing a PAR/AFR in  accordance with OMB guidance or publishing corrective actions.
We also found that IGs at 3 of the 24 CFO Act Agencies—DOI, State, and  DOT—did not clearly state whether their agencies were overall compliant  or noncompliant with the IPERA criteria. Specifically, DOI IG’s report  failed to include an explicit statement of overall agency-level compliance,  while the language in the IG reports regarding agency-level compliance  under IPERA at State and DOT was unclear. Although the State IG’s  report concluded that State “was in substantial compliance with improper  payment requirements,” we learned from OMB officials that the State IG  determined that the agency was compliant under IPERA. The DOT IG’s  report statement was also inconclusive, stating that DOT’s improper  payment reporting “generally complies with IPERA requirements.”  However, this statement is misleading because the IG also reported that  the agency did not comply with one of the IPERA criteria because two  DOT programs failed to meet their improper payment reduction targets for  fiscal year 2014. As noted above, IPERA defines compliance as including  all six of the listed criteria, and OMB guidance requires an IG to state the  agency’s overall compliance status in its report.
OMB guidance states that IG compliance reviews are an important  component of the accountability of improper payment efforts. Additionally,  Standards for Internal Control in the Federal Government provides that  timely, relevant, and reliable communications and information are needed  for an agency to achieve all of its objectives.
Not adhering to guidance for preparing IPERA compliance reports by  failing to report concrete compliance determinations reduces the  comparability and consistency of such reports and therefore the reports’  usefulness to the agency. Further, when an IG does not adhere to OMB  guidance and statutory requirements by making (1) unclear statements on  overall compliance or (2) positive statements of compliance when an  agency meets the majority, but not all, of the IPERA criteria, agency  officials may incorrectly conclude their agency’s compliance status and  therefore delay taking corrective actions. For example, as noted above,  we discovered that because the DOI IG did not clearly state that its  agency was noncompliant under IPERA, DOI officials were unaware of  their agency’s noncompliant status in fiscal year 2014 until later. Such  instances could delay the implementation of corrective actions to  remediate instances of noncompliance, contributing to continued  noncompliance the following year.
section_title: Two IGs Did Not Initially Report Their Agencies as Noncompliant for 3 Consecutive Years though the Agencies Had Programs That Failed to Meet Reduction Targets
paragraphs: As noted above, two agencies—DHS and SSA—were not initially  required to submit proposals for reauthorization or statutory changes to  Congress in response to 3 or more consecutive years of noncompliance  as of fiscal year 2014 because their respective IGs initially did not report  the agencies as noncompliant for 3 consecutive years. However, in  response to our audit findings that identified instances of noncompliance  the IGs had not previously reported, one of the IGs subsequently  determined that its agency had been noncompliant for 3 or more  consecutive years. Until the IG revises its determination, the other agency  is not subject to the congressional reporting requirement to submit  proposals for reauthorization or statutory changes.
Specifically, during our audit work we found that several DHS programs  had not met their improper payment reduction targets in fiscal years 2011  through 2014. The DHS IG agreed and subsequently reissued its IPERA  compliance reports for each of these fiscal years from February through  April 2016 to reflect determinations of noncompliance. Upon the  reissuance of the IG reports, OMB advised DHS to take the actions  required under IPERA in response to 1 year of noncompliance for fiscal  year 2014. OMB noted that requiring the agency to take the respective  actions required for 1, 2, and 3 years of noncompliance in the same year  would be challenging for the agency and unlikely to yield meaningful  results.
Similarly, the SSA IG reported in fiscal years 2011 and 2012 that the  agency was compliant with the six IPERA criteria, but we noted that its  Supplemental Security Income (SSI) program failed to meet its reported  reduction target in both years. In its fiscal year 2013 and 2014 reports, the  SSA IG reported the SSI program as noncompliant with IPERA criteria  because the program did not meet its reduction targets. SSA IG officials  told us that they have no plans to reissue fiscal year 2011 or 2012 IPERA  compliance reports to state a conclusion of noncompliance, thus the  requirement for the agency to take action based on this noncompliance  was not triggered based on fiscal year 2014 results.
When IGs do not make compliance determinations in accordance with the  IPERA criteria, agencies are unable to take the appropriate steps  required by the law when programs have been noncompliant for  consecutive years. As a result, Congress is not informed of consistently  noncompliant programs.
section_title: Two IGs Did Not Fully Adhere to OMB’s Requirements for High- Priority Programs
paragraphs: In fiscal year 2014, OMB designated 13 programs with total estimated  improper payments of $115.3 billion as high priority. These high-priority  programs account for 92.5 percent of the total government-wide improper  payment estimate. IPERIA amended IPIA to direct OMB to annually  identify a list of high-priority programs in need of greater levels of  oversight and review. In general, OMB has implemented this requirement  by designating a program as high priority when its estimated improper  payments exceed $750 million in the most recent fiscal year.
OMB requires agencies with high-priority programs to develop  supplemental measures on an annual or more frequent basis, and to  explain how they have tailored their corrective actions to better reflect the  specific processes, procedures, and risks surrounding those programs.  Furthermore, the agency IG is required to (1) evaluate the agency’s  assessment of the program risk level and the quality of the improper  payment estimates and methodology, (2) determine the extent of  oversight warranted, and (3) provide the agency head with  recommendations. However, we found that the SSA IG did not report on  its evaluation of SSA’s improper payment rate for SSI and Old-Age,  Survivors, and Disability Insurance, the agency’s two high-priority  programs. The report did, however, include recommendations to mitigate  the main root cause of SSI overpayments.
We also found that the HHS IG reported its evaluation of four of five HHS  high-priority programs, but it did not fulfill the requirement for the  Children’s Health Insurance Program. Table 6 shows all programs  deemed high priority by OMB for fiscal year 2014.
When IGs do not fully evaluate high-priority programs as directed by  IPERIA and OMB guidance, their compliance reports are incomplete and  therefore of less value in communicating deficiencies to be addressed to  the agencies. Specifically, by not reviewing the agencies’ risk  assessments for high-priority programs and the quality of the programs’  improper payment estimates and methodologies, the IGs missed the  opportunity to provide their agencies with any recommendations for  improving internal controls and preventing and reducing improper  payments in those programs.
section_title: Assessments of Disaster Relief Programs Producing Improper Payment Estimates Were Not Performed by Two IGs
paragraphs: We found that for fiscal year 2014 2 of 16 CFO Act agency IGs—SSA and  the Department of Housing and Urban Development (HUD)—did not  comply with the requirement to assess compliance for disaster relief  programs reporting improper payment estimates. Specifically, the SSA  IG’s report did not assess its agency’s Hurricane Sandy Disaster Relief  program’s compliance with IPERA criteria, although SSA as an agency  reported an estimate of the program’s improper payments in its fiscal year  2014 AFR. Similarly, the HUD IG’s report did not include a determination  of HUD’s Community Development Block Grant - Disaster Relief  program’s compliance with IPERA criteria, even though HUD included  improper payment estimates and related information for this program in  its fiscal year 2014 AFR. The Disaster Relief Appropriations Act, 2013  requires all programs or activities receiving disaster relief funding  appropriated by that act to be considered susceptible to significant  improper payments for purposes of IPIA until those funds are expended.  Out of a total of 19 federal agencies that received disaster relief funding  under the act, 16 are CFO Act agencies. Because funds from this act are  automatically considered susceptible to significant improper payments  under IPIA, those agencies’ IGs are required to include their assessments  of those programs’ compliance under IPERA in their annual reports.  Table 7 lists the 16 CFO Act agencies that received funds under the  Disaster Relief Appropriations Act, 2013.
When IGs do not fully comply with IPERA, the Disaster Relief  Appropriations Act, and OMB guidance by failing to assess disaster relief  programs’ compliance under IPERA, there is an increased risk that  agencies’ improper payment estimate reporting is inaccurate or  incomplete, thereby undermining the agencies’ ability to effectively  develop and implement corrective action plans for programs and  increasing the risk of potential future improper payments. Additionally, IG  monitoring and assessment of improper payments in federal disaster  relief programs could help ensure that emergency disaster relief funding  is distributed to the citizens who need it.
section_title: OMB Has Taken Steps to Educate IGs on the Form and Content of Their IPERA Compliance Reports
paragraphs: OMB issued the latest iteration of its Circular No. A-123, Appendix C, in  October 2014. As stated previously, this guidance changed certain  requirements for fiscal year 2014 reporting, extended the reporting period  for IG IPERA reports, and eliminated an additional criterion for IGs to  assess whether agencies have reported on efforts to recapture improper  payments. This guidance also attempted to make IG determinations of  compliance and noncompliance more clear and concise by requiring that  high-level summaries of compliance be included in their reports, both  overall and by IPERA criteria.
As part of its annual monitoring of agency improper payments estimation  and reporting, OMB reviews the IGs’ compliance determinations for each  criterion, IG recommendations and the agencies’ responses, and areas  where additional follow-up or guidance may be needed. In addition to  these reviews, OMB responds to questions from the agencies and IGs  throughout the year and refers them to the applicable guidance on an as- needed basis.
In October 2015, upon observing that many of the IPERA compliance  reports from fiscal year 2014 and prior years were still difficult to interpret  and compare, OMB held a town hall for all federal IGs to clarify its  implementation guidance contained in OMB Circular No. A-123, Appendix  C. The town hall detailed the six IPERA criteria and how IGs can make  clearer determinations of compliance and noncompliance in their  upcoming fiscal year 2015 reviews that were due in May 2016. OMB  officials received feedback from IGs that this town hall was useful in  tailoring their IPERA reviews; therefore, OMB officials stated that they  plan to conduct another town hall for IGs in the summer or fall of 2016.
To determine if IGs corrected deficiencies identified in preliminary GAO  findings shared with them and followed the guidance provided in the  October 2015 OMB town hall meeting, we conducted a review of the  fiscal year 2015 IPERA reports issued in May 2016 by the seven IGs in  whose fiscal year 2014 reports we identified deficiencies. We verified that  these deficiencies have been corrected for fiscal year 2015 reporting and  therefore determined that no recommendations to these IGs are  warranted. OMB officials also stated that they plan to review the  compliance status of all agencies contained in the IGs’ fiscal year 2015  IPERA compliance reports and identify areas where additional guidance  is needed.
section_title: Conclusions
paragraphs: Estimated improper payments across the federal government have  increased by over $30 billion in the last 2 fiscal years. During the same  time period, agency noncompliance with the criteria listed in IPERA, as  determined by IGs, also increased, with the highest number of CFO Act  agency IGs reporting noncompliance in fiscal year 2014.
IPERA compliance reviews serve a key function in helping to ensure that  federal dollars are not misspent and that estimates of improper payments  are accurate and complete. In order to allow Congress to effectively  monitor compliance with IPERA criteria, it is important for agencies to  keep relevant committees notified of the noncompliant status of their  programs. In the past year, OMB has made efforts to clarify its IPERA  implementation guidance to IGs and federal agency chief financial officers  and address shortfalls in the accuracy and completeness of the IGs’  reports. OMB is attempting to address these shortfalls through its  communications with the IGs, and officials told us that the next planned  town hall meeting will occur later in the year.
section_title: Recommendations for Executive Action
paragraphs: To help fulfill the IPERA and OMB requirements to submit proposals to  Congress when agencies reach 3 or more consecutive years of  noncompliance with IPERA criteria, we recommend the following four  actions.
We recommend that the Secretary of Agriculture or a designee submit  a letter to Congress detailing proposals for reauthorization or statutory  changes in response to 3 consecutive years of noncompliance as of  fiscal year 2014 for its (1) Child and Adult Care Food Program;         (2) School Breakfast Program; (3) National School Lunch Program;  and (4) Special Supplemental Nutrition Program for Women, Infants,  and Children. To the extent that reauthorization or statutory changes  are not considered necessary to bring a program into compliance, the  Secretary or designee should state so in the letter.
We recommend that the Administrator of the Small Business  Administration or a designee submit a letter to Congress detailing  proposals for reauthorization or statutory changes in response to 3  consecutive years of noncompliance as of fiscal year 2014 for the  agency’s (1) 7(a) Guaranty Loans program and (2) Disaster  Assistance Loans program. To the extent that reauthorization or  statutory changes are not considered necessary to bring the programs  into compliance, the Administrator or designee should state so in the  letter.
We recommend that the Secretary of Transportation or a designee  submit a letter to Congress detailing proposals for reauthorization or  statutory changes in response to 3 consecutive years of  noncompliance as of fiscal year 2014 for the agency’s Federal Transit  Administration’s Formula Grants program. To the extent that  reauthorization or statutory changes are not considered necessary to  bring the program into compliance, the Secretary or designee should  state so in the letter.
We recommend that the Secretary of Defense or a designee submit a  letter to Congress detailing proposals for reauthorization or statutory  changes in response to 3 consecutive years of noncompliance as of  fiscal year 2014 for its DOD Travel Pay program. To the extent that  reauthorization or statutory changes are not considered necessary to  bring the program into compliance, the Secretary or designee should  state so in the letter.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to OMB, the IG offices of the 24 CFO  Act agencies, and the CFO offices of those agencies with programs that  were determined to be noncompliant with IPERA criteria for 3 consecutive  years as of fiscal year 2014: DOD, DOL, DOT, HHS, SBA, SSA,  Treasury, and USDA. These eight agencies included all 4 of the agencies  to which we made recommendations. We received responses from all  organizations that were provided the draft report. Table 8 summarizes the  responses received from these the 24 CFO Act agencies and their IG  offices.
DOD and the DOD IG provided a combined response, which is reprinted  in appendix IV. OMB’s written comments are reprinted in appendix XIII.
As noted in the table, some of the agencies’ CFO and IG offices also  provided technical comments, which we incorporated as appropriate. We  also received e-mailed responses from officials at the following offices,  stating that the organization had no comments on the draft report: the  CFO offices of SBA and SSA; and the IG offices of USDA, the  Department of Commerce, the Department of Education, the Department  of Energy, the Department of Justice, DOL, the Environmental Protection  Agency, NSF, the Nuclear Regulatory Commission, SBA, and the U.S.  Agency for International Development.
In their written comments, the CFO offices of DOD and DOT concurred  with our recommendations. The DOD CFO office noted that it does not  consider reauthorization or statutory change necessary for its Travel Pay  program, but will submit a letter to Congress containing planned actions  for improvement by August 30, 2016. The DOT CFO office stated that  DOT establishes aggressive reduction targets for its programs and noted  improvement in its Formula Grants program, which met its reduction  target in fiscal year 2015 after being noncompliant under IPERA for 3  consecutive years.
In their e-mailed responses, officials from CFO offices at SBA and USDA  neither concurred nor disagreed with our recommendations.
In their written comments, IGs at DOD, DHS, DOI, State, and VA  concurred with our findings. OMB provided written comments that  reiterated its commitment to improving payment accuracy across the  federal government. The HHS IG concurred with our finding in an e- mailed response.
In its written response, the GSA IG office stated that it partially agreed  with the findings in our report. While the GSA IG office agreed that its  fiscal year 2014 high-level summary of IPERA compliance could be  improved, it noted that its summary paragraph specifically identified the  criteria that GSA did not meet. However, as we noted in this report, the  GSA IG reported inaccuracies in GSA’s fiscal year 2014 AFR information  and a failure to complete corrective actions from the previous year’s  review, but it was unclear if these instances resulted in determinations of  compliance or noncompliance with IPERA criteria. OMB guidance directs  IGs to not only report on the IPERA criteria that the IG has determined  the agency did not meet, but also those criteria the agency met. The GSA  IG office further stated that it has taken actions to clarify its high-level  summary in its fiscal year 2015 IPERA compliance report.
In an e-mailed response dated June 1, 2016, the DOT Assistant IG for  Information Technology and Audits disagreed with our finding that the  IG’s determination that DOT “generally complied” with IPERA criteria was  misleading and also stated that the magnitude of DOT’s instances of  noncompliance was not conveyed in our report. However, as stated in our  report, IPERA defines compliance as including all six of the listed criteria,  and thus if an IG reports that any of the IPERA criteria are not met by its  agency, the agency is overall noncompliant. Our report further conveys  the one criterion and program responsible for DOT’s noncompliance in  fiscal year 2014. Despite its disagreement with our findings, the DOT IG  office reported a clearer determination of agency compliance in its fiscal  year 2015 report, stating that the agency “(did) not comply with IPERA  requirements”.
As discussed with your offices, unless you publicly announce the contents  of this report earlier, we plan no further distribution until 7 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Director of the Office of Management and  Budget, all CFO Act agencies’ inspectors general, and select CFO Act  agencies’ chief financial officers. In addition, the report will be available at  no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff members who made key contributions to  this report are listed in appendix XIV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to review (1) the number of agencies, among those  listed in the Chief Financial Officers Act of 1990, as amended (CFO Act),  that complied with the criteria listed in the Improper Payments Elimination  and Recovery Act of 2010 (IPERA), as reported by their inspectors  general (IG), for fiscal years 2011 through 2014, and what criteria and  programs the IGs concluded were primarily responsible for instances of  agency noncompliance; (2) the number of programs at the 24 CFO Act  agencies that were determined noncompliant with IPERA criteria by their  IGs for 3 or more consecutive years, as of fiscal year 2014, and the  extent to which the responsible agencies submitted the required  information to Congress; and (3) the extent to which CFO Act agency IGs  have adhered to certain IPERA requirements and the related Office of  Management and Budget (OMB) guidance contained in OMB Circular No.  A-123, Appendix C, in their fiscal year 2014 improper payment  compliance reviews, including reporting on special disaster relief  appropriations and OMB-designated high-priority programs. Although  IPERA requirements apply to the head of each executive agency, we only  reviewed reports of those agencies designated as CFO Act agencies  because these agencies represented over 99 percent of the total  government-wide improper payments reported in fiscal year 2014.
To address our first objective, we identified the requirements that  agencies must meet by reviewing the Improper Payments Information Act  of 2002, as amended; IPERA; and OMB guidance. We analyzed CFO  Act agency IGs’ fiscal year 2014 IPERA reports, which were the most  current reports available at the beginning of our review, and summarized  information related to agency compliance with IPERA criteria and  identified common findings and related causes for improper payments, as  reported by the IGs. We also relied on and reviewed prior year supporting  documentation and analyses of CFO Act agencies’ IG IPERA reports for  fiscal years 2011, 2012, and 2013, as reported in GAO’s December 2014  report (GAO-15-87R), and compared agencies’ compliance with each  IPERA criterion over fiscal years 2011 through 2013, as reported by the  IGs. To summarize the CFO Act agencies’ noncompliant programs for  fiscal years 2011 through 2014, we compared data from the IG IPERA  reports and agencies’ performance and accountability reports (PAR) and  agency financial reports (AFR) for those years. We also determined the  programs responsible for noncompliance over this period by analyzing  and summarizing the determinations made in the IG reports. Our work did  not include validating or retesting the data or methodologies used by the  IGs in coming to their conclusions. We confirmed our findings with the  relevant CFO Act agency IGs and OMB. We also obtained and  summarized OMB and agencies’ data on improper payment estimates by  agency program (see app. III).
To address our second objective, we summarized IG determinations  made in the IGs’ annual IPERA compliance reports from fiscal year 2011  through fiscal year 2014. We corroborated our findings with OMB and the  relevant CFO Act agency IGs. To determine if agencies responsible for  these noncompliant programs had submitted either proposals for  reauthorization or statutory changes to Congress, we interviewed and  requested information from relevant agency offices of chief financial  officer in coordination with the agency IGs. We did not make conclusions  as to the sufficiency or completeness of the information contained in  proposals for reauthorization or statutory changes submitted to Congress.
To address our third objective, we identified requirements that agencies’  IGs must meet by reviewing IPERA, the Improper Payments Elimination  and Recovery Improvement Act of 2012, and OMB guidance for IG  IPERA reports, which is contained in OMB Circular No. A-123, Appendix  C (OMB Memorandum M-15-02). We compared CFO Act agencies’ IGs  improper payment reporting for fiscal year 2014 to statutory requirements  and OMB guidance, including reporting on high-priority programs and  disaster relief funds. To determine the population of OMB’s high-priority  programs, we obtained the list for fiscal year 2014 from  www.paymentaccuracy.gov. To ensure that this list was reported correctly  on the website, we interviewed OMB officials and corroborated the  information. For each agency responsible for a high-priority program, we  reviewed the related IG’s IPERA compliance report for fiscal year 2014 to  ensure that the IG’s review of the high-priority program met all elements  prescribed by OMB Memorandum M-15-02. For agencies reporting  improper payment estimates for disaster relief funding, we reviewed the  Disaster Relief Appropriations Act, 2013 and determined whether the  agencies listed therein reported improper payment estimates and whether  their IGs reported compliance determinations for those programs in their  fiscal year 2014 IPERA reports.
We also compared the structure and content of the fiscal year 2014 IG  reports to that required by IPERA and OMB Memorandum M-15-02.  Further, we reviewed the improper payments reporting contained in the  AFRs and PARs of the CFO Act agencies for fiscal year 2014 to ensure  that certain IG compliance determinations for some criteria agreed to our  observations. Specifically, in each fiscal year 2014 CFO Act agency AFR  or PAR, we determined whether the following IPERA Section 3 criteria  were met for each program assessed to be at risk for significant improper  payments: (1) corrective action plans were reported, (2) annual reduction  targets were published and met, and (3) a gross improper payment  estimate of less than 10 percent was reported for each program. For the  remaining criteria related to publishing the required information in the  PAR or AFR, conducting risk assessments, and publishing improper  payment estimates for programs deemed susceptible to significant  improper payments, we did not make conclusions but relied on the IGs’  judgments of compliance and noncompliance. IGs gave their respective  agencies the opportunity to comment on their fiscal year 2014 IPERA  compliance reports, and we reviewed all agency and IG responses. To  determine if certain IGs corrected deficiencies identified in preliminary  GAO findings shared with them and followed OMB guidance for fiscal  year 2015 reporting, we reviewed the fiscal year 2015 IPERA reports  issued in May 2016 by the seven IGs in whose fiscal year 2014 reports  we identified deficiencies. We determined that the conclusions in the IGs’  reports were sufficiently reliable for our reporting purposes.
We conducted this performance audit from September 2015 to June 2016  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.
section_title: Appendix II: CFO Act Agencies and Programs Reported as Noncompliant under IPERA by IGs for Fiscal Year 2014
paragraphs: Table 9 lists the Chief Financial Officers Act of 1990 agencies and their  programs that their inspectors general reported in fiscal year 2014 were  noncompliant with the Improper Payments Elimination and Recovery Act  of 2010.
section_title: Appendix III: Reported Improper Payment Estimates by Agency and Program/Activity for Fiscal Year 2015
subsections: section_title: Table 10 lists reported improper payment estimates by agency and program or activity for fiscal year 2015.
section_title: Appendix V: Comments from the Department of Homeland Security Office of Inspector General
section_title: Appendix VI: Comments from the Department of the Interior Office of Inspector General
section_title: Appendix VII: Comments from the Department of State Office of Inspector General
section_title: Appendix VIII: Comments from the Department of Transportation
section_title: Appendix IX: Comments from the Department of Veterans Affairs Office of Inspector General
section_title: Appendix X: Comments from the General Services Administration Office of Inspector General
section_title: Appendix XI: Comments from the Office of Personnel Management Office of Inspector General
section_title: Appendix XII: Comments from the Social Security Administration
section_title: Appendix XIII: Comments from the Office of Management and Budget
section_title: Appendix XIV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Philip McIntyre (Assistant  Director), Laura Bednar (Auditor-in-Charge), Maria Belaval, Wilfred  Holloway, Jason Kelly, Jason Kirwan, and Ricky A. Perry, Jr., made key  contributions to this report.