The Nation's Fiscal Health: Action is Needed to Address the Federal Government's Fiscal Future
Published: 2017-05-03T00:00:00

Fast Facts:
The Comptroller General testified before Congress about the federal government's unsustainable long-term fiscal outlook—the growing imbalance between revenues (money collected) and spending (driven by health care, Social Security, and net interest on the debt).
A plan is needed to put the nation on a sustainable long-term fiscal path. But in the near-term, Congress and executive branch agencies have opportunities to improve the government's fiscal condition, including trying to address improper payments and the tax gap, as well as making changes where federal programs or activities are at high risk or fragmented, overlapping, or duplicative.

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Congress and administration face serious economic, security, and social challenges that will require difficult policy choices in the short term about the level of federal spending and investments as well as ways to obtain needed resources. At the same time, the federal government is highly leveraged in debt by historical norms.
In addition to near term financing decisions, a broader fiscal plan is needed to put the government on a more sustainable long-term path. In January 2017, GAO reported on the need for such a plan by outlining the fiscal condition of the U.S. government and its future path based on current fiscal policies. This statement summarizes GAO’s work on this issue and also discussed how Congress and executive branch agencies can help in the near term by taking action to address improper payments; duplication, overlap, or fragmentation; high-risk areas; and the tax gap.
section_title: What GAO Found
paragraphs: The Federal Government Is on an Unsustainable Fiscal Path
According to the 2016 Financial Report , the federal deficit in fiscal year 2016 increased to $587 billion—up from $439 billion in fiscal year 2015. Federal receipts grew a modest $18.0 billion due primarily to extensions of tax preferences, but that was outweighed by a $166.5 billion increase in spending, driven by Social Security, Medicare, and Medicaid, and interest on debt held by the public (net interest). Debt held by the public rose as a share of gross domestic product (GDP), from 74 percent at the end of fiscal year 2015 to 77 percent at the end of fiscal year 2016. This compares to an average of 44 percent of GDP since 1946.
The 2016 Financial Report , the Congressional Budget Office (CBO), and GAO projections all show that, absent policy changes, the federal government’s fiscal path is unsustainable and that the debt-to-GDP ratio would surpass its historical high of 106 percent within 15 to 25 years (see figure).
Of further concern is the fact that none of the long-term projections include certain other fiscal risks that could affect the federal government’s financial condition in the future. Some examples of such fiscal risks are the Pension Benefit Guaranty Corporation’s funding and governance structure, U.S. Postal Service’s retiree health and pension funds, government insurance programs such as the National Flood Insurance Program, and military, economic, financial, or weather-related crises.
Importance of Early Action: The 2016 Financial Report , CBO, and GAO all make the point that the longer action is delayed, the greater and more drastic the changes will have to be. As shown in the timeline, the trust funds face financial challenges that add to the importance of beginning action. It is important to develop and begin to implement a long-term fiscal plan for returning to a sustainable path.
Debt Limit Is Not a Control on Debt: The current debt limit is not a control on debt, but rather an after-the-fact measure that restricts the Department of the Treasury’s authority to borrow to finance the decisions already enacted by Congress and the President. GAO has suggested Congress consider alternative approaches that would better link decisions about borrowing to finance the debt with decisions about spending and revenue at the time those decisions are made.
Opportunities to Begin to Address the Government’s Fiscal Health
GAO has identified actions Congress and agencies can take now to help improve the fiscal situation. GAO highlighted five agencies—the Departments of Defense, Health and Human Services, and Veterans Affairs; the Social Security Administration; and the Office of Management and Budget. These agencies made up 69 percent—$ 3.0 trillion—of federal outlays in fiscal year 2016. Although these actions alone cannot put the federal government on a sustainable fiscal path, they would improve both the fiscal situation and the federal government’s operations.
Actions Needed to Reduce Improper Payments: Reducing payments that should not have been made or that were made in an incorrect amount could yield significant savings. The improper payments estimate in fiscal year 2016 was over $144 billion. Since fiscal year 2003, cumulative estimates have totaled over $1.2 trillion.
Opportunities Exist to Improve the Efficiency and Effectiveness of Government Operations : GAO has identified government operations that are at high risk of fraud, waste, abuse, and mismanagement and has presented numerous areas to reduce, eliminate, or better manage fragmentation, overlap, or duplication; achieve cost savings; or enhance revenue. Fully addressing the issues raised could yield increased savings, better services to the public, and improved federal programs.
Multiple Strategies Needed to Address the Persistent Tax Gap: Reducing the gap between taxes owed and those paid on time could increase tax collections by billions. Most recently, the annual gross tax gap was estimated to be $458 billion.
Action Needed to Improve Information on Programs and Fiscal Operations: Decision-making could be improved by ensuring the government’s financial statements are fully auditable, increasing attention to tax expenditures, and effectively implementing the Digital Accountability and Transparency Act of 2014.

section_title: Letter
paragraphs: Thank you for the opportunity to be here today to discuss our nation’s  fiscal health and opportunities to address long-term fiscal issues. The  Congress and administration face serious economic, security, and social  challenges that will require difficult policy choices in the short term about  the level of federal spending and investments as well as ways to obtain  needed resources. At the same time, the federal government is highly  leveraged in debt by historical norms and on an unsustainable long-term  fiscal path caused by a structural imbalance between revenue and  spending absent a change in fiscal policy. At the end of fiscal year 2016,  the debt held by the public as a share of gross domestic product (GDP)  was at 77 percent; the highest it has been since 1950. Since 1946 the  debt-to-GDP ratio has averaged 44 percent. A sustainable policy is one  where the debt-to-GDP ratio is stable or declining over the long term.
Decisions over the near term to enhance economic growth and address  national policies need to be accompanied by a broader fiscal plan to put  the government on a more sustainable long-term path. This is essential to  ensure that the United States remains in a strong economic position to  meet its security and social needs as well as to preserve flexibility in  addressing unforeseen events.
In January 2017, we issued our first report on the nation’s fiscal health.  The report illuminated the need for such a long-term fiscal plan by  outlining the fiscal condition of the U.S. government and its future path  based on current fiscal policies. Policymakers will need to have a plan  that considers reductions in programmatic (non-interest) spending,  increases in revenue, or more likely, a combination of the two in order to  change the long-term fiscal path.
Today, I will discuss not only the federal government’s unsustainable  long-term outlook, the drivers of that outlook, and the need for a long-term  plan to address the underlying and growing imbalance between spending  and revenues but also opportunities Congress and executive branch agencies have to take actions in the short term that will assist in  addressing the government’s fiscal condition. While addressing the long- term structural imbalance will require fiscal policy changes, in the near  term opportunities exist in a number of areas to improve this situation,  including addressing improper payments and the tax gap and where  federal programs or activities are at high risk or fragmented, overlapping,  or duplicative. As you know, last week we released our 2017 annual  report identifying actions and areas for Congress or executive branch  agencies to reduce, eliminate, or better manage fragmentation, overlap,  and duplication and achieve other financial benefits.
My statement is based upon on our report on the nation’s fiscal health;  our work on improper payments; the 2017 duplication, overlap, and  fragmentation annual report; the 2017 High-Risk List; and other related  work. These efforts are based upon work conducted in in accordance with  all sections of GAO’s Quality Assurance Framework that are relevant to  our objectives. The framework requires that we plan and perform the  engagement to obtain sufficient and appropriate evidence to meet our  stated objectives and to discuss any limitations in our work. We believe  that the information and data obtained, and the analysis conducted,  provide a reasonable basis for any findings and conclusions in this  product. More details on the scope and methodology for our reports can  be found in the full reports.
subsections: section_title: The Federal Government Is on an Unsustainable Fiscal Path
subsections: section_title: Growing Debt-to-GDP Ratio
paragraphs: Over the long term, the imbalance between spending and revenue that is  built into current law and policy is projected to lead to continued growth of  the deficit and debt held by the public as a share of GDP. This situation— in which debt grows faster than GDP—means the current federal fiscal  path is unsustainable. Projections from the 2016 Financial Report of the  United States and the Congressional Budget Office (CBO), and  simulations from GAO all show that, absent policy changes, the federal  government’s fiscal path is unsustainable.
According to the 2016 Financial Report, the federal deficit in fiscal year  2016 increased to $587 billion—up from $439 billion in fiscal year 2015.  This marked a change from 6 years of declining deficits. The federal  government’s receipts (taxes and other collections) increased by $18.0  billion (0.6 percent), from $3,248.7 billion to $3,266.7 billion, but that was  outweighed by a $166.5 billion increase in spending from $3,687.6 billion  to $3,854.1 billion. Spending increases in 2016 were driven by Social  Security (the Old-Age and Survivors Insurance and Disability Insurance  programs), Medicare, Medicaid, and interest on debt held by the public  (net interest).
Debt held by the public was 77 percent of GDP at the end of fiscal year  2016—an increase from 74 percent at the end of fiscal year 2015.  Although the federal government has carried debt throughout virtually all  of U.S. history, the 2016 Financial Report shows that the current fiscal  position is unusual in the nation’s history and that debt as a share of the  economy is the highest it has been since 1950. As shown in figure 1, debt  as a share of GDP peaked as 106 percent just after World War II, but  then fell rapidly. Since 1946 the debt-to-GDP ratio has averaged 44  percent.
The long-term fiscal projections in the federal government’s 2016  Financial Report and those prepared annually by CBO and GAO each  use somewhat different assumptions, but their results are the same:  absent policy changes, the federal government’s fiscal path is  unsustainable with debt held by the public as a share of GDP projected to  grow continuously.
Projections show that under current law it will grow to exceed the  historical high of 106 percent in 15 to 25 years. (See figure 2.) Both the  timing and pace of this growth depend on underlying assumptions made,  especially about health care costs. Under GAO’s alternative simulation  debt held by the public as a share of GDP would surpass its historical  high of 106 percent by 2032. CBO’s extended baseline shows debt held  by the public surpassing that level by 2035 and the 2016 Financial Report  projections show debt held by the public surpassing 106 percent by 2041.
Of further concern is the fact that none of these long-term projections  include certain fiscal risks that create fiscal exposures that could affect  the government’s financial condition in the future. Fiscal exposures are responsibilities, programs, and activities that may legally commit or create  expectations for future federal spending based on current policy, past  practices, or other factors. Some examples of such fiscal risks include:
The Pension Benefit Guaranty Corporation’s (PBGC) financial future  is uncertain because of long-term challenges related to PBGC’s  governance and funding structure. PBGC’s liabilities exceeded its  assets by over $79 billion as of the end of fiscal year 2016—an  increase of over $3 billion from the end of fiscal year 2015 and of  about $44 billion since 2013. PBGC reported that it is subject to  potential further losses of $243 billion if plan terminations occur that  are considered reasonably possible.
The U.S. Postal Service (USPS) continues to be in a serious financial  crisis as it has reached its borrowing limit of $15 billion and finished  fiscal year 2016 with a reported net loss of $5.6 billion. USPS’s  business model is not viable and cannot fund its current level of  services, operations, and obligations. USPS’s liabilities exceeded its  assets by $56 billion as of the end of fiscal year 2016 and USPS  reported an additional $39.5 billion in unfunded liabilities at that time  for its retiree health and pension funds. USPS reported a total  unfunded liability for its retiree health and pension funds of $73.4  billion, $33.9 billion of which relates to required prefunding payments  for postal retirees’ health benefits that have not been made and is  included in the liabilities reported on its balance sheet.
Some government insurance programs such as the National Flood  Insurance Program do not have sufficient dedicated resources to  cover expected costs. The Federal Emergency Management  Agency (FEMA), which administers the National Flood Insurance  Program, owed $24.6 billion as of March 2017 to the Department of  the Treasury (Treasury) for money borrowed to pay claims and other  expenses, including $1.6 billion borrowed following a series of floods  in 2016. FEMA is unlikely to collect enough in premiums to repay this  debt.
Citizens also look to the federal government for assistance when crises  happen and immediate federal action is expected. This can take the form  of expectations for additional and large amounts of federal spending.  These crises often cannot be predicted and are very difficult to budget for.  According to the Congressional Research Service, the federal budget  does contain some funds for disaster response through the Disaster  Relief Fund; however, this fund often is insufficient to respond to the  number and scope of natural disasters, and it is not typically used as a  funding source for other types of unforeseen events such as wars,  financial crises, cyberattacks, or health pandemics.
section_title: Key Drivers of Long-Term Outlook
paragraphs: The growing gap between revenues and spending reflects three main  trends: significant growth in spending for retirement and healthcare  programs, rising interest payments on the government’s debt, and modest  growth in revenues. The size of the gap is such that both the spending  and revenue side of the budget must be examined.
The 2016 Financial Report’s long-term fiscal projections, CBO’s long-term  projection, and GAO’s long-term simulations all show that the key drivers  on the spending side are health care programs and interest on debt held  by the public (net interest). Social security also poses significant financial  challenges.
subsections: section_title: Health Care Spending
paragraphs: Total health care spending (public and private) in the United States  continues to grow faster than the economy. As figure 3 shows, growth in  federal spending for health care programs has exceeded the growth of  GDP historically and is projected to grow faster than the economy. These  health care programs include Medicare, Medicaid, and the Children’s  Health Insurance Program, along with federal subsidies for health  insurance purchased through the marketplaces established by the Patient  Protection and Affordable Care Act (ACA) and related spending.
According to GAO’s alternative simulation, federal spending on major  health care programs is projected to increase from $993 billion in fiscal  year 2016 to $2 trillion in fiscal year 2045 in 2016 dollars. Growth in  federal spending on health care is driven, in part, by increasing  enrollment in federal health care programs, stemming from both the aging  of the population and the expansion of federal programs. As many  members of the baby-boom generation age and as life expectancy  continues to generally increase, the number of people 65 or older is  expected to rise by more than one-third, thereby increasing the number of  Medicare beneficiaries. (See figure 4.)
According to CBO, outlays for Medicaid in fiscal year 2016 rose by $18  billion (or 5.3 percent) compared with outlays in fiscal year 2015. The  decision of more than half the states to expand eligibility for their  Medicaid programs as provided by the ACA was the primary reasons for  this growth. The growth in federal spending on health care can also be  attributed to increases in health care spending per enrollee. Per  beneficiary health care spending has historically risen faster than per  capita economic output and is projected to do so in the future.
section_title: Net Interest
paragraphs: While health care spending is a key programmatic and policy driver of the  long-term outlook on the spending side of the budget, eventually,  spending on net interest becomes the largest category of spending in  both the 2016 Financial Report’s long-term fiscal projections and GAO’s  simulations. Specifically, in GAO’s alternative simulation, net interest  increases from $248 billion in fiscal year 2016 to $1.4 trillion in fiscal year  2045 in 2016 dollars.
Growth in interest payments occurs for two main reasons:
Growing debt: Even without any increase in interest rates, the cost of  financing the debt grows as debt held by the public grows, resulting in  greater interest payments than would otherwise exist with less debt.  Spending on interest can absorb resources that could be used instead  for other priorities.
Growth in interest rates: In recent years interest rates on Treasury  securities have remained low, lowering interest costs. However, CBO  and others project those interest rates will rise in the long term,  increasing the net interest costs on the debt. Marketable U.S.  Treasury securities consist of bills, notes, and bonds. Treasury seeks  to accomplish “lowest cost financing over time” in the way it manages  debt issuance.
Net interest costs will depend in part on the outstanding mix of Treasury  securities. Treasury issues securities in a wide range of maturities to  appeal to the broadest range of investors. Longer-term securities typically  carry higher interest rates but offer the government the ability to “lock in”  fixed interest payments over a longer period and reduce the amount of  debt that Treasury needs to refinance in the short term. In contrast,  shorter-term securities generally carry lower interest rates. They also play  an important role in financial markets. For example, investors use  Treasury bills to meet requirements to buy financial assets maturing in a  year or less. However, shorter-term securities add uncertainty to the  government’s interest costs and require Treasury to conduct more  frequent auctions to refinance maturing debt.
As of September 30, 2016, 58 percent of marketable Treasury securities  held by the public were scheduled to mature and need to be refinanced in  the next 4 years—potentially at higher interest rates. As the 2016  Financial Report notes, each year trillions of dollars of debt mature and  new debt is issued in its place. In fiscal year 2016, new borrowings were  $8.4 trillion, and repayments of maturing debt held by the public were  $7.3 trillion.
section_title: Social Security
paragraphs: Social Security also poses significant financial challenges. It provides  individuals with benefits that can help offset the loss of income due to  retirement, death, or disability, and paid more than $905 billion in Old-Age  and Survivors Insurance (OASI) and Disability Insurance (DI) program  benefits in fiscal year 2016. However, demographic factors, such as an  aging population and slower labor force growth, are straining Social  Security programs and contributing to a gap between program costs and  revenues. Absent any changes, it is projected that the Social Security  trust funds will deplete their assets and that incoming revenues will not be  sufficient to pay benefits in full on a timely basis.
section_title: Fiscal Pressures Growing
paragraphs: To change the long-term fiscal path, policymakers will need to consider  policy changes to the entire range of federal activities: entitlement  programs, other mandatory spending, discretionary spending, and  revenue. The 2016 Financial Report, CBO, and GAO all make the point  that the longer action is delayed, the greater and more drastic the  changes will have to be.
Medicare’s Hospital Insurance trust fund, and Social Security’s OASI and  DI trust funds face financial challenges that add to the importance of  beginning action soon. (See figure 5.) It is important to develop and begin  to implement a long-term fiscal plan for returning to a sustainable path.
section_title: Debt Limit Is Not a Control on Debt
paragraphs: As currently structured, the debt limit—a legal limit on the amount of  federal debt that can be outstanding at one time—does not restrict  Congress and the President’s ability to enact spending and revenue  legislation that affects the level of debt; nor does it otherwise constrain  fiscal policy. The debt limit is an after-the-fact measure: the spending and  tax laws that result in debt have already been enacted. In other words,  the debt limit restricts Treasury’s authority to borrow to finance the  decisions already enacted by Congress and the President.
I cannot overstate the importance of preserving confidence in “the full  faith and credit” of the United States. Failure to increase (or suspend) the  debt limit in a timely manner could have serious negative consequences  for the Treasury market and increase borrowing costs. For those Treasury  securities issued during the 2013 debt limit impasse, we estimated that  the additional borrowing costs incurred through fiscal year 2014 were  between $38 and $70 million depending on the assumptions used.
When delays in raising the debt limit occur, Treasury often must deviate  from its normal debt management operations and take a number of  extraordinary actions to avoid exceeding the debt limit. The Bipartisan  Budget Act of 2015 temporarily suspended the debt limit from November  2, 2015, through March 15, 2017. Following the expiration of the debt  limit suspension period, on March 16, 2017, Treasury began taking  extraordinary actions to avoid exceeding the debt limit. These  extraordinary actions included suspending investments to certain federal  government accounts.
During the 2013 impasse, investors reported taking the unprecedented  action of systematically avoiding certain Treasury securities—(i.e., those  that would mature around the dates when Treasury projected it would  exhaust the extraordinary actions it used to manage debt as it  approached the debt limit). For these securities, the actions resulted in  both a dramatic increase in interest rates and a decline in liquidity in the  secondary market where securities are traded among investors.
To minimize disruptions to the Treasury market and to help inform fiscal  policy debate in a timely way, we recommended that decisions about  giving Treasury the authority to borrow be made when decisions about  spending and revenues are made. In 2015, we conducted a forum with  experts in the field to help identify options for Congress to delegate its  borrowing authority and better align decisions about the level of debt with  decisions on spending and revenue. All maintain Congressional control  and oversight over federal borrowing. Our report described the benefits  and challenges presented by each of the options described below:
Option 1: Link Action on the Debt Limit to the Budget Resolution.
This is a variation of a previously used approach under which  legislation raising the debt limit to the level envisioned in the  Congressional Budget Resolution would be spun off and either be  deemed to have passed or be voted on immediately thereafter.
Option 2: Provide the Administration with the Authority to  Increase the Debt Limit, Subject to a Congressional Motion of  Disapproval. This is a variation of an approach contained in the  Budget Control Act of 2011. Congress would give the administration  the authority to propose a change in the debt limit, which would take  effect absent enactment of a joint resolution of disapproval within a  specified time frame.
Option 3: Delegating Broad Authority to the Administration to  Borrow as Necessary to Fund Enacted Laws. This is an approach  used in some other countries: delegate to the administration the  authority to borrow such sums as necessary to fund implementation of  the laws duly enacted by Congress and the President. Since the laws  that affect federal spending and revenue and so create the need for  debt already require adoption by the Congress, Congress would still  maintain control over the amount of federal borrowing.
We did not endorse a specific option but we did recommend that  Congress consider alternative approaches that better link decisions about  the debt limit with decisions about spending and revenue at the time  those decisions are made.
Some of the experts also supported replacing the debt limit with a fiscal  rule imposed on spending and revenue decisions. The federal  government has enacted such fiscal rules in the past. For example, the  Budget Control Act of 2011 enacted limits on discretionary spending,  which are enforced by additional spending cuts if those limits are  breached (known as a sequester). Congress could consider additional  fiscal rules to frame and control the overall results of spending and  revenue decisions. Such rules could limit spending or affect other areas  of the budget such as overall debt or annual deficits. Other countries have  also operated under such fiscal rules.
For example, the European Union’s (EU) stability and growth pact allows  for sanctions against member states that exceed certain target levels of  debt or deficits defined as “excessive” by the EU. The pact is a set of  rules designed to ensure that countries in the EU pursue sound public  finances and coordinate their fiscal policies. The EU defines an excessive  budget deficit as one greater than 3 percent of GDP. Public debt is  considered excessive if it exceeds 60 percent of GDP without diminishing  at an adequate rate (defined as a decrease of the excess debt by 5  percent per year on average for more than 3 years). That said, several  nations have struggled to meet these targets in recent years. In general,  budget experts and other observers have noted that the success of fiscal  rules depends on effective enforcement and a sustained commitment by  policymakers and the public.
section_title: Congress and Agencies Have Opportunities to Take Actions that Will Assist in Addressing the Government’s Fiscal Condition
paragraphs: Achieving long-term fiscal sustainability will require examining revenues  and the drivers of spending and enacting legislation to narrow the growing  gap between spending and revenues. However, in our prior work we have  also identified numerous actions Congress and agencies can take now to  help improve the fiscal situation. It is important for agencies to act as  stewards of federal resources. Although these actions alone cannot put  the U.S. government on a sustainable fiscal path, they would improve  both the fiscal situation and the federal government’s operations.
subsections: section_title: Actions Needed to Address Improper Payments
subsections: section_title: Improper Payments Remain a Significant, Pervasive Government-Wide Issue
paragraphs: Improper payments remain a significant and pervasive government-wide  issue. For several years, we have reported improper payments as a  material weakness in our audit reports on the consolidated financial  statements of the U.S. government. Since fiscal year 2003—when  certain agencies began reporting improper payments as required by the  Improper Payments Information Act of 2002 (IPIA)—cumulative reported  improper payment estimates have totaled over $1.2 trillion, as shown in  figure 6.
For fiscal year 2016, agencies reported improper payment estimates  totaling $144.3 billion, an increase of over $7 billion from the prior year’s  estimate of $136.7 billion. The reported estimated government-wide  improper payment error rate was 5.1 percent of related program outlays.  These figures do not include the Department of Defense’s (DOD)  Defense Finance and Accounting Service (DFAS) Commercial Pay  program because of concerns regarding the reliability of the program’s  estimate, which I will discuss later in this statement. As shown in figures 7  and 8, the reported improper payment estimates—both dollar estimates  and error rates—have been increasing over the past 3 years, largely  because of increases in Medicaid’s reported improper payment estimates.
For fiscal year 2016, overpayments accounted for approximately 93  percent of the improper payment estimate, according to  www.paymentaccuracy.gov, with underpayments accounting for the  remaining 7 percent.
Although primarily concentrated in three areas (Medicare, Medicaid, and  the Earned Income Tax Credit), the reported estimated improper  payments for fiscal year 2016 were attributable to 112 programs spread  among 22 agencies. (See figure 9.)
Agencies reported improper payment estimates exceeding $1 billion for  14 programs, as shown in table 1, and error rates exceeding 10 percent  for 11 programs. (See table 2.)
In our audit report on the fiscal year 2016 consolidated financial  statements of the U.S. government, we continued to report a material  weakness in internal control related to improper payments because the  federal government is unable to determine the full extent to which  improper payments occur and reasonably assure that appropriate actions  are taken to reduce them. Challenges include potentially inaccurate risk  assessments, programs that do not report any improper payment  estimates or report unreliable or understated estimates, and  noncompliance issues.
Agencies conduct risk assessments to determine which programs need to  develop improper payment estimates. However, in Improper Payments  Elimination and Recovery Act (IPERA) compliance reports for fiscal year  2015—the most current reports available—various inspectors general  (IG) reported issues related to agencies’ improper payment risk  assessments. For example:
The IG for the General Services Administration reported that the  agency’s risk assessment was flawed because, among other things,  the questionnaires in the assessment did not ask if programs actually  experience improper payments and were distributed to individuals  who did not have direct or specific knowledge of improper  payments. Further, the IG found that the agency did not evaluate  relevant reports—such as IG or GAO reports—to identify relevant  findings, and two of the six questionnaires that the IG reviewed  included incomplete information.
The IG for the Department of Housing and Urban Development found  that the agency did not assess all of its programs on a 3-year cycle  and did not consider all nine of the required risk factors in conducting  its risk assessment. The IG also noted instances in which the  agency did not rate risk factors in accordance with the agency’s own  policy.
It is also important to note that nine of the Chief Financial Officer (CFO)  Act agencies either reported no improper payment estimates or reported  estimates for only disaster relief programs funded through the Disaster  Relief Appropriations Act, 2013 for fiscal year 2016. The nine agencies  were:
U.S. Agency for International Development
Department of Commerce (disaster relief only)
Department of the Interior (disaster relief only)
Department of Justice (disaster relief only)
National Aeronautics and Space Administration (disaster relief only).
Programs That Do Not Report Improper Payment Estimates  We found that not all agencies had developed improper payment  estimates for all of the programs and activities they identified as  susceptible to significant improper payments. Eight agencies did not  report improper payment estimates for 18 risk-susceptible programs. (See  table 3.)
Because agencies did not report improper payment estimates for these  risk-susceptible programs, the government-wide improper payment  estimate is understated and agencies are hindered in their efforts to  reduce improper payments in these programs. For example, the  Department of Health and Human Services (HHS) did not report an  improper payment estimate for Temporary Assistance for Needy Families,  a program with outlays of over $15 billion for fiscal year 2016. HHS cited  statutory limitations prohibiting the agency from requiring states to  participate in an improper payment measurement for the program.  Another example is U.S. Department of Agriculture’s (USDA)  Supplemental Nutrition Assistance Program. Although USDA has  reported improper payment estimates for this program in prior years, the  agency did not report an estimate for fiscal year 2016. In its fiscal year  2016 agency financial report, USDA stated that it was unable to validate  data provided by 42 of the 53 state agencies that administer the program.  USDA stated that it could not adjust for this unreliability and calculate a  national error rate.
Potentially Unreliable or Understated Estimates  Improper payment estimates for certain programs may be unreliable or  understated. For example, in May 2013 we reported that DOD had major  deficiencies in its process for estimating fiscal year 2012 improper  payments in the Defense Finance and Accounting Service (DFAS)  Commercial Pay program, including deficiencies in identifying a complete  and accurate population of payments. The foundation of reliable  statistical sampling estimates is a complete, accurate, and valid  population from which to sample. As of October 2016, DOD was still  developing key quality assurance procedures to ensure the completeness  and accuracy of sampled populations. Therefore, DOD’s fiscal year 2016  improper payment estimates, including its estimate for the DFAS  Commercial Pay program, may not be reliable. DFAS Commercial Pay’s  reported program outlays are significant—approximately $249 billion for  fiscal year 2016. Consequently, a small change in the program’s  estimated error rate could result in a significant change in the dollar value  of its improper payment estimate.
Further, flexibility in how agencies are permitted to implement improper  payment estimation requirements can contribute to inconsistent or  understated estimates. For example, in February 2015, we reported that  DOD uses a methodology for estimating TRICARE improper payments  that is less comprehensive than the methodology the Centers for  Medicare & Medicaid Services (CMS) used for Medicare. Though the  programs are similar in that they pay providers on a fee-for-service basis  and depend on contractors to process and pay claims, TRICARE’s  methodology does not examine the underlying medical record  documentation to discern whether each sampled payment was supported  or whether the services provided were medically necessary. On the other  hand, Medicare’s methodology more completely identifies improper  payments beyond those resulting from claim processing errors, such as  those related to provider noncompliance with coding, billing, and payment  rules.
As a result, the estimated improper payment error rates for TRICARE and  Medicare are not comparable, and TRICARE’s error rate is likely  understated. In addition, corrective actions for TRICARE improper  payments do not address issues related to medical necessity errors—a  significant contributor to Medicare improper payments. We recommended  that DOD implement a more comprehensive TRICARE improper payment  methodology and develop more robust corrective action plans that  address the underlying causes of improper payments. In October 2016,  DOD requested proposals for claim record reviews—including medical  record reviews—to begin the process of incorporating medical record  reviews in its methodology for calculating improper payment rates.
Since fiscal year 2011, IPERA has required agencies’ IGs to annually  report on the respective agencies’ compliance under the act. IGs at 15  of the 24 CFO Act agencies found their respective agencies to be  noncompliant under IPERA for fiscal years 2014 and 2015, the highest  total since IGs began their annual compliance reviews. Although  noncompliance has occurred across all six of the criteria listed in IPERA,  the most common issues are noncompliance related to reporting and  meeting improper payment reduction targets or reporting an error rate  below 10 percent. Continued noncompliance further highlights the need  for additional efforts to reduce improper payments.
section_title: Strategies for Reducing Improper Payments
paragraphs: Agencies can use detailed root cause analysis and related corrective  actions to implement preventive and detective controls to reduce  improper payments. Collaboration with other relevant entities can also  assist federal agencies in reducing improper payments.
Root cause analysis is key to understanding why improper payments  occur and developing effective corrective actions to prevent them. In  2014, the Office of Management and Budget (OMB) established new  guidance to assist agencies in better identifying the root causes of  improper payments and assessing their relevant internal controls.  Agencies across the federal government began reporting improper  payments using these more detailed root cause categories for the first  time in their fiscal year 2015 financial reports. Further identification of the  true root causes of improper payments can help to determine the  potential for fraud. Figure 10 shows the root causes of government-wide  improper payments for fiscal year 2016, as reported by OMB. We will  continue to focus on agencies’ efforts to both identify the root causes and  take appropriate actions to reduce improper payments.
Implementing strong preventive controls can serve as the frontline  defense against improper payments. When agencies proactively prevent  improper payments, they increase public confidence in program  administration and they avoid the difficulties associated with the “pay and  chase” aspects of recovering overpayments. Examples of preventive  controls include up-front eligibility validation through data sharing,  predictive analytic technologies, and program design review and  refinement. For example, we have made the following recommendations  and matters for congressional consideration to improve preventive  controls in various programs.
Use of the Do Not Pay (DNP) working system. Established by OMB  and hosted by Treasury, the DNP working system is a web-based,  centralized data-matching service that allows agencies to review  multiple databases—such as data on deceased individuals and  entities barred from receiving federal awards—before making  payments. In October 2016, we found that the 10 agencies we  reviewed used the DNP working system in limited ways, in part  because OMB had not provided a clear strategy and guidance. Only  2 of these 10 agencies used the DNP working system on a preaward  or prepayment basis for certain types of payments. Because the DNP  working system offers a single point of access to multiple databases,  agencies may be able to streamline their existing data matching  processes. Among other things, we recommended that OMB develop  a strategy—and communicate it through guidance—for whether and  how agencies should use the DNP working system to complement or  streamline existing data matching processes. OMB generally agreed  with the concept of developing a strategy and said it would explore the  concept further.
Further, we found that the death records offered through the DNP  working system do not include state-reported death data. The Social  Security Administration (SSA) officials stated that sharing its full death  file—which includes state-reported death data—would require an  amendment to the Social Security Act. We suggested that Congress  amend the Social Security Act to explicitly allow SSA to share its full  death file with Treasury for use through the DNP working system.  Sharing the full death file through the DNP working system would  enhance efforts to identify and prevent improper payments.
Expanded error correction authority. IRS has the authority to  correct some calculation errors and check for other obvious  noncompliance such as claims for a deduction or credit that exceed  statutory limits. We have suggested to Congress that such authority  be authorized on a broader basis rather than on a piecemeal basis  and that controls may be needed to help ensure that this authority is  used properly. Also, Treasury has proposed expanding IRS’s “math  error” authority to “correctible error” authority to permit it to correct  errors in cases where information provided by the taxpayer does not  match information in government databases, among other things.  Providing these authorities could help IRS correct additional errors— including some errors with Earned Income Tax Credit claims—and  avoid burdensome audits and taxpayer penalties.
Additional prepayment reviews in Medicare fee-for-service. In  April 2016, we found that CMS could improve its claim review  programs by conducting additional prepayment reviews.  Using  prepayment reviews to deny improper claims and prevent  overpayments is consistent with CMS's goal to pay claims correctly  the first time. It can also better protect Medicare funds because not all  overpayments can be collected. A recovery auditor (RA) is one type of  claim review contractor that CMS uses, and in 2013 and 2014, 85  percent of RA claim reviews were postpayment. Because CMS is  required by law to pay RAs contingency fees from recovered  overpayments, the RAs can only conduct prepayment reviews under a  demonstration.  From 2012 through 2014, CMS conducted a  demonstration in which the RAs conducted prepayment reviews and  were paid contingency fees based on claim denial amounts. CMS  officials considered the demonstration a success. However, CMS has  not requested legislation that would allow for RA prepayment reviews  by amending existing payment requirements and thus may be missing  an opportunity to better protect Medicare funds.
We recommended that CMS seek legislative authority to allow RAs to  conduct prepayment claim reviews. HHS did not concur with this  recommendation, stating that CMS has implemented other programs  as part of its efforts to move away from the "pay and chase" process  of recovering overpayments. We continue to believe that seeking  authority to allow RAs to conduct prepayment reviews is consistent  with CMS's strategy to pay claims properly the first time.
Although preventive controls remain the frontline defense against  improper payments, effective detection techniques can help to quickly  identify and recover those overpayments that do occur. Detective controls  play a significant role not only in identifying improper payments but also in  providing information on why these improper payments were made,  highlighting areas that need stronger preventive controls. Examples of  detective controls include data mining and recovery auditing. The  following are examples of recommendations we have made to improve  detective controls in various programs.
Improvements to recovery efforts in Medicare Advantage. In April  2016, we reported that CMS needs to fundamentally improve its  efforts to recover substantial amounts of improper payments in the  Medicare Advantage program. CMS conducts two types of risk  adjustment data validation (RADV) audits to identify and correct  Medicare Advantage improper payments: national RADV activities  and contract-level RADV audits. Both types of audits determine  whether the diagnosis codes submitted by Medicare Advantage  organizations are supported by a beneficiary’s medical record  documentation. Contract-level RADV audits seek to identify and  recover improper payments from Medicare Advantage organizations  and thus to deter them from submitting inaccurate beneficiary  diagnoses. However, we found that CMS does not focus its RADV  audits on the contracts with the highest potential for improper  payments and has not developed specific plans or a timetable for  including recovery auditor contractors in the contract-level RADV audit  process.
We made several recommendations, including that CMS modify the  selection of contracts for contract-level RADV audits to focus on those  most likely to have high rates of improper payments and that CMS  develop specific plans and a timetable for incorporating a recovery  audit contractor in the Medicare Advantage program. In response to  our report, HHS concurred with the recommendations and reaffirmed  its commitment to identifying and correcting Medicare Advantage  improper payments. By implementing our recommendations, CMS  could recover hundreds of millions of dollars in improper payments by  improving its processes for auditing payments to Medicare Advantage  organizations.
Review of federal determinations of Medicaid eligibility. In  October 2015, we reported that additional efforts were needed to  ensure that state spending is appropriately matched with federal funds  in Medicaid. States and the federal government share in the  financing of the Medicaid program, with the federal government  matching most state expenditures for Medicaid services on the basis  of a statutory formula. CMS has implemented interim measures to  review the accuracy of state eligibility determinations and examine  states’ expenditures for different eligibility groups, for which states  may receive multiple federal matching rates.
However, some states have delegated authority to the federal  government to make Medicaid eligibility determinations through the  federally facilitated exchange. CMS has excluded these states from  the reviews. This creates a gap in efforts to ensure that only eligible  individuals are enrolled into Medicaid and that state expenditures are  correctly matched by the federal government. We recommended that  CMS conduct reviews of federal Medicaid eligibility determinations to  ascertain the accuracy of these determinations and institute corrective  action plans where necessary.
HHS has taken some steps to improve the accuracy of Medicaid  eligibility determinations, as we recommended, but has not conducted  a systematic review of federal eligibility determinations. For example,  in March 2017, HHS reported that it is reviewing federal  determinations of Medicaid eligibility in two of the nine states that  have delegated eligibility determination authority to the federal  marketplace. Although the actions HHS has taken have value, they  are not sufficient to identify erroneous eligibility determinations.  Specifically, without a systematic review of federal eligibility  determinations, the department lacks a mechanism to identify and  correct errors and associated payments.
While federal agencies are responsible for reducing improper payments,  agencies may consider collaboration with relevant entities—such as  OMB, states, state auditors, and the IG community—to expand efforts to  reduce improper payments. In November 2016, we held a discussion with  various state auditors and federal agencies to identify potential  opportunities to strengthen collaboration, focusing on federal and state  initiatives related to improper payments. Further, in September 2015, we  reported on the Recovery Operations Center’s (ROC) significant  analytical services, provided primarily to IGs to support antifraud and  other activities. While funding for the ROC ended in September 2015, officials from some small- and medium-sized IGs stated that they do not  have the capabilities to develop independent data analytics or pay for a  similar service, thus foregoing the ROC’s capabilities. We suggested that  Congress may wish to consider directing the Council of the Inspectors  General on Integrity and Efficiency to develop a legislative proposal to  reconstitute the essential capabilities of the ROC to help ensure federal  spending accountability.
Finally, I recently met with the Director of OMB to discuss improper  payments, among other issues. This spring we are providing OMB a letter  highlighting open priority recommendations related to important issues,  including improper payments. Strengthened efforts and collaboration  among relevant entities is important to reducing improper payments  across the federal government.
section_title: Opportunities Exist to Improve Efficiency and Effectiveness of Government Programs
paragraphs: For the last 7 years, we have annually presented actions Congress or  executive branch agencies could take to reduce, eliminate, or better  manage fragmentation, overlap, or duplication; achieve cost savings; or  enhance revenue. We also maintain our High-Risk List to bring attention  to government operations that are at high risk of fraud, waste, abuse, and  mismanagement, or that need broad-based transformation to address  economy, efficiency, or effectiveness challenges of government  operations. Combined, these efforts have led to hundreds of billions of  dollars in financial benefits over the last decade. Fully addressing the  issues we raise in those reports could yield additional benefits, such as  increased savings, better services to the public, and improved federal  programs. For example, we estimate tens of billions more dollars could be  saved by fully implementing our remaining open recommendations to  address fragmentation, overlap, and duplication. While these issues span  the government, a substantial number of them involve five agencies that  made up 69 percent—$3.0 trillion—of federal outlays in fiscal year 2016:  the Departments of Defense, Health and Human Services, and Veterans  Affairs; the Social Security Administration; and the Office of Management  Budget.
subsections: section_title: Department of Defense
paragraphs: DOD represented about 15 percent of federal spending in fiscal year  2016, with outlays totaling about $637.6 billion. In our 2011 to 2017  annual duplication reports, we directed 168 actions to DOD in areas that  contribute to DOD’s effectiveness. As of March 2017, 95 of these 168  actions remained open. DOD also bears responsibility, in whole or part,  for half (17 of 34) of the areas we have designated as high risk. Our work  suggests that effectively taking actions to address these issues would  yield significant financial benefits, as discussed below.
DOD weapon systems acquisition. DOD’s portfolio of 78 major  acquisition programs has a total estimated cost of $1.46 trillion. Over  the past 4 fiscal years, our analyses of DOD’s weapon system  acquisitions have resulted in nearly $30 billion in savings. We have six  open priority recommendations to improve DOD’s management of  three of DOD’s most expensive programs, each of which is facing  significant cost, schedule, and performance challenges—the F-35  Joint Strike Fighter, Littoral Combat Ship, and Ford Class Aircraft  Carrier. We continue to encourage DOD and Congress to hold  programs accountable by ensuring that they attain the required  knowledge at key decision points—such as conducting systems  engineering reviews and making sure technologies are fully mature  before product development begins, and successfully completing  testing—before committing resources to production. By acting on our  open recommendations for F-35, LCS, and Ford Class, and applying  the same knowledge-based approach across its portfolio, DOD could  potentially achieve tens of billions of dollars more in cost savings or  cost avoidance over the life of these programs.
DOD contract management. DOD obligated $273.5 billion in fiscal  year 2015 on contracts for goods and services, including major  weapon systems, support for military bases, information technology,  consulting services, and commercial items. As the federal  government’s largest procurement agency, DOD has opportunities to  leverage its buying power to reduce prices, improve quality, and  otherwise enhance supplier management and performance. We have  found that leading commercial companies often manage 90 percent of  their spending using strategic sourcing and generate 10 to 20 percent  savings in doing so.
In contrast, we have reported that DOD components (Navy, Air Force,  and Army) managed between 10 and 27 percent of their $8.1 billion in  spending on information technology services through their preferred  strategic sourcing contracts in fiscal year 2013. By awarding hundreds  of potentially duplicative contracts, these components diminished the  department’s buying power. Further, the low utilization rate of  federal strategic sourcing initiatives contracts by DOD and other  federal agencies resulted in missed opportunities to leverage buying  power. In this case, the Federal Strategic Sourcing Initiatives reported  an estimated savings of $470 million between fiscal years 2011 and  2015, an overall savings rate of about 25 percent. In fiscal year 2015,  however, the seven large agencies that comprised the Leadership  Council—a cohort of large federal agencies responsible for federal  strategic sourcing initiatives—directed less than 10 percent of their  spending on the types of goods and services offered under federal  strategic sourcing initiatives in fiscal year 2015, resulting in a missed  opportunity to potentially have saved over $1 billion.
DOD headquarters reductions. Since 2014, and in part to respond  to congressional direction, DOD has undertaken initiatives intended to  improve the efficiency of headquarters organizations and identify  related cost savings, but it is unclear to what extent these initiatives  will help the department achieve the potential savings it has identified.  DOD has many organizations with multiple layers of headquarters  management, and at times these organizations possess complex and  overlapping relationships. To improve the management of DOD’s  headquarters-reduction efforts, we recommended that the Secretary  of Defense  conduct systematic determinations of personnel requirements for  the Office of the Secretary of Defense, Joint Staff, and military  service secretariats and staffs;  set a clearly defined and consistently applied starting point as a  baseline for headquarters-reduction efforts and track reductions  against the baselines to provide reliable accounting of savings and  reporting to Congress; and  conduct comprehensive, periodic evaluations of whether the  combatant commands are sized and structured to efficiently meet  assigned missions.
By implementing these recommendations, DOD could yield billions in  savings.
DOD commissaries. DOD operates 238 commissaries worldwide to  provide groceries and household goods at reduced prices as a benefit  to military personnel, retirees, and their dependents. In our November  2016 and March 2017 reports, we found that DOD can more efficiently  manage its commissaries and potentially achieve cost savings. DOD  could better position itself to meet its $2 billion target from fiscal years  2017 through 2021 by implementing our recommendation to develop  a plan with assumptions, a methodology, cost estimates, and specific  time frames for achieving alternative reductions to appropriations, to  support DOD’s efforts to ensure that DOD’s cost savings target is  feasible and accurate. DOD generally agreed with our  recommendations.
DOD leases and use of underutilized spaces at military  installations. Overreliance on costly leasing is one of the major  reasons that federal real property management remains on our high- risk list. Our prior work has shown that owning buildings often costs  less than operating leases, especially where there are long-term  needs for space. We analyzed all 5,566 lease records in DOD’s real  property database for fiscal year 2013 (the most recent year for which  data were available) and found that there were 407 records for  general administrative space. The total annual rent plus other costs  for these leases was approximately $326 million for about 17.6 million  square feet of leased space.
We recommended that DOD look for opportunities to relocate DOD  organizations in leased space to installations that may have  underutilized space because of force structure reductions or other  indicators of potentially available space, where such relocation is cost- effective and does not interfere with the installation’s ongoing military  mission. DOD did not agree with the recommendation and had not  taken action, as of October 2016. These actions could potentially save  millions of dollars each year in reduced or avoided rental costs.
section_title: Department of Health and Human Services
paragraphs: We have identified numerous opportunities within the Department of  Health and Human Services (HHS) to achieve cost savings. HHS  represented about 28 percent of the fiscal year 2016 federal budget, with  outlays totaling about $1.2 trillion. HHS’s largest mandatory programs are  Medicare, which in fiscal year 2016 financed health services for over 57  million beneficiaries at an estimated cost of $696 billion, and Medicaid,  which covered an estimated 72.2 million people in fiscal year 2016 at a  cost of $575.9 billion. Our work suggests that effectively implementing  these actions, could yield substantial financial benefits.
Our work has identified opportunities for billions of dollars of savings and  the need for improved federal oversight in multiple areas of traditional  Medicare—also known as Medicare fee-for service (FFS)—and Medicare  Advantage (MA), which provides health care coverage to Medicaid  beneficiaries through private health plans.
Payments and provider incentives in traditional Medicare.
Medicare spending on hospital outpatient department services has  grown rapidly in recent years—nearly $58 billion spent in 2015. In  December 2015, we reported that some of this growth is because  services that were typically performed in physician offices have shifted  to hospital outpatient departments, resulting in higher reimbursement  rates. We recommended that Congress consider directing HHS to  equalize payment rates between settings for certain services and  return the associated savings to the Medicare program. Congress  passed legislation to exclude services furnished by off-campus  hospital outpatient departments from higher payment beginning in  2017; however, this exclusion does not apply to services furnished by  providers billing as hospital outpatient departments or those meeting  certain mid-build requirements prior to November 2, 2015. We  maintain that Medicare could save billions of dollars annually if  Congress were to equalize the rates for certain health care services,  which often vary depending on where the service is performed.
The federal government spends about $50 billion annually to help  hospitals with billions of dollars in costs incurred for uncompensated  care—services hospitals provide to uninsured and low-income  patients for which they are not fully compensated. Both Medicare and  Medicaid make multiple types of payments that help offset hospital  uncompensated care costs. In June 2016, we reported that Medicare  Uncompensated Care payments are not well aligned with hospital  uncompensated care costs, potentially resulting in relatively large  amounts of available funding being distributed to hospitals where  uncompensated care costs are likely declining.
We recommended that the Centers for Medicare & Medicaid Services  (CMS) instead base those payments on actual hospital  uncompensated care costs and account for Medicaid payments made  when making Medicare Uncompensated Care payments to individual  hospitals. HHS concurred with the recommendations and indicated  that the agency planned to implement them beginning in fiscal year  2021 to allow time for hospitals to collect and report reliable data.  Implementing our recommendations could prevent more than $1  billion annually from going to hospitals that may not have any  uncompensated care.
The Medicare prospective payment system (PPS) introduced better  control over program spending and provided hospitals with an  incentive for efficient resource use. Yet for decades, as required by  law, Medicare has paid 11 cancer hospitals differently than PPS  hospitals—specifically, these cancer hospitals are reimbursed largely  based on their reported costs and as such have little incentive for  containing costs. To help HHS better control Medicare spending and  encourage efficient delivery of care, and to generate cost savings  from any reductions in payments to cancer hospitals that are  exempted from the PPS, we recommended that Congress consider  requiring Medicare to pay these PPS-exempt cancer hospitals as it  pays PPS teaching hospitals, or provide the Secretary of HHS with  the authority to otherwise modify how Medicare pays PPS-exempt  cancer hospitals, and provide that all forgone outpatient payment  adjustment amounts be returned to the Supplementary Medical  Insurance Trust Fund. The 21st Century Cures Act, enacted in  December 2016, slightly reduces the additional payments cancer  hospitals receive for outpatient services. However, the law keeps in  place the payment system for outpatient services that differs from how  Medicare pays PPS teaching hospitals. Moreover, the law does not  change how PPS-exempt cancer hospitals are paid for inpatient  services. Until Medicare pays PPS-exempt cancer hospitals in a way  that encourages efficiency, rather than largely on the basis of reported  costs, Medicare remains at risk for overspending almost $500 million  per year.
Medicare Advantage and other Medicare health plans. The  number and percentage of Medicare beneficiaries enrolled in MA has  grown steadily over the past several years, increasing from 8.1 million  (20 percent of all Medicare beneficiaries) in 2007 to 17.5 million (32  percent of all Medicare beneficiaries) in 2015. We have identified  opportunities for CMS to improve the accuracy of MA payments, to  account for diagnostic coding differences between MA and FFS. We  previously reported that shortcomings in CMS’s adjustment resulted in  excess payments to MA plans totaling an estimated $3.2 billion to  $5.1 billion over a 3-year period from 2010 through 2012. In January  2012, we recommended that CMS take steps to improve the accuracy  of the adjustment made for differences in diagnostic coding practices  by, for example, accounting for additional beneficiary characteristics  such as sex, health status, and Medicaid enrollment status, as well as  including the most recent data available.
Although CMS has taken steps to improve the accuracy of the risk  adjustment model and Congress has taken steps to increase the  adjustment, CMS has not improved its methodology for calculating the  diagnostic coding adjustment. Until CMS shows the sufficiency of the  diagnostic coding adjustment or implements an adjustment based on  analysis using an updated methodology, payments to MA plans may  not accurately account for differences in diagnostic coding between  these plans and traditional Medicare providers. CMS could achieve  billions of dollars in additional savings by better adjusting for  differences between MA plans and traditional Medicare providers in  the reporting of beneficiary diagnoses.
We have also found that improved federal oversight is needed in multiple  areas of Medicaid, including in the area of financing transparency and  oversight and oversight of Medicaid demonstrations.
Growing expenditures for and oversight of large Medicaid  demonstrations. Medicaid demonstrations have become a significant  proportion of Medicaid expenditures, growing steadily from about $50  billion, or about 14 percent of total Medicaid expenditures in fiscal  year 2005, to $165 billion, or close to one-third of total Medicaid  expenditures in fiscal year 2015. Between 2002 and 2014, we  reviewed several states’ approved comprehensive demonstrations  and found that HHS had not ensured that all of the demonstrations  would be budget neutral to the federal government. We recommended  that HHS improve the process for reviewing and approving Medicaid  demonstrations and, in January 2008, we elevated this matter for  consideration by Congress. Legislation was introduced in the 114th  Congress but not enacted to require HHS to improve the Medicaid  demonstration review process consistent with our recommendations.
In October 2016, CMS officials told us that they had established new  budget neutrality policies to reduce demonstration spending limits and  they are implementing the policies over time. However, these new  policies do not address all of the problematic budget neutrality  methodologies that we identified. We maintain that improving the  process for reviewing, approving, and making transparent the basis  for spending limits approved for Medicaid demonstrations could  potentially save billions of dollars.
Financing and provider payment transparency and oversight. To  effectively oversee state Medicaid programs, CMS needs complete  and accurate information on payments to individual providers. We  have raised concerns about states making large Medicaid  supplemental payments—payments in addition to the regular, claims- based payments made to providers for services they provided—to  institutional providers, such as hospitals and nursing facilities. In fiscal  year 2015, these payments totaled about $55 billion. In April 2015, we  concluded that federal oversight of Medicaid payments is limited in  part by insufficient federal information on payments. Oversight is  also limited because CMS does not have a policy and process for  determining that payments are economical and efficient. As a result,  CMS may not identify or examine excessive payments states make to  individual providers.
We recommended that CMS ensure that states report accurate  provider-specific payment data for all payments, develop a policy  establishing criteria to determine when provider-specific payments are  economical and efficient, and develop a process for identifying and  reviewing payments to individual providers to determine if they meet  the established criteria. CMS planned to publish a proposed rule for  public comment in fall 2016 to improve the oversight of supplemental  payments made to individual providers, but as of March 2017, the  proposed rule had not been published. CMS could save hundreds of  millions of dollars by taking steps to implement our recommendations.
section_title: Department of Veterans Affairs
paragraphs: We have identified numerous opportunities for the Department of  Veterans Affairs (VA) to more effectively and efficiently achieve its  mission to promote the health, welfare, and dignity of all veterans by  ensuring that they receive medical care, benefits, and social services. In  fiscal year 2016, VA spent about $179.6 billion—about 4 percent of  federal outlays—for veterans’ benefits and services. Our work suggests  that effectively implementing these actions could yield cost savings and  efficiencies that would improve the delivery of services.
VA health care. Since designating VA health care as a high-risk area  in 2015, we continue to be concerned about VA’s ability to ensure its  resources are being used cost-effectively and efficiently to improve  veterans’ timely access to health care, and to ensure the quality and  safety of that care. VA operates one of the largest health care delivery  systems in the nation, with 168 medical centers and more than 1,000  outpatient facilities organized into regional networks. VA has faced a  growing demand by veterans for its health care services. To help  address veterans’ health care needs, VA’s budgetary resources have  more than doubled since 2006 to $91.2 billion in fiscal year 2016.
Despite these increased resources, there have been numerous  reports in this same period—by us, VA’s Office of the Inspector  General, and others—of VA facilities failing to provide timely health  care. In some cases, veterans have reportedly been harmed by the  delays in care or VA’s failure to provide care at all.
Among the concerns we have raised in these reports is the lack of  reliability, transparency and consistency of VA’s budget estimates and  tracking obligations. These concerns were evident in June 2015,  when VA requested additional funds from Congress because agency  officials projected a funding gap in fiscal year 2015 of about $3 billion  in its medical services appropriation account. The projected funding  gap was largely due to administrative weaknesses, which slowed the  utilization of the Veterans Choice Program in fiscal year 2015 and  resulted in higher-than-expected demand for VA’s previously  established VA community care programs. To better align cost  estimates for community care services with associated obligations, in  June 2016, we reported that VA was examining options for replacing  its outdated financial information technology systems and VA has  since established a projected completion date of fiscal year 2020 for  that effort. However, VA continues to underestimate the resources it  needs to provide health care services efficiently and effectively. For  example, in February 2017, a VA official told us that VA would need to  request additional funding for fiscal year 2018 above already  appropriated funding for that year.
VA benefits. VA provides billions of dollars in monthly disability  compensation to veterans with disabling conditions caused or  aggravated by their military service. In recognition of cases where the  benefit does not adequately compensate veterans who are unable to  maintain substantially gainful employment, VA may provide  supplemental compensation through its Total Disability Individual  Unemployability (TDIU) benefit. We found that 54 percent of disabled  veterans receiving TDIU benefits in fiscal year 2013 were 65 years or  older. By comparison, other benefit programs, such as Social Security  Disability Insurance, consider retirement age a cause for ineligibility  and convert benefits for those reaching their full retirement age to a  Social Security retirement benefit. We recommended that VA develop  a plan to study whether age should be considered when deciding if  veterans are unemployable. VA concurred with our recommendation  and began reviewing disability eligibility policies and procedures in  April 2015, including consideration of age in claim decisions. The  review was on going as of February 2017. If it were determined that  TDIU benefits should only be provided to those veterans younger than  their full Social Security retirement age, VA could achieve significant  cost savings—$15 billion from 2015 through 2023, according to a  CBO estimate.
section_title: Social Security Administration
paragraphs: In fiscal year 2016, the Social Security Administration (SSA) spent about  $979.7 billion, roughly 23 percent of federal outlays. We have identified a  number of opportunities for SSA to improve the integrity of its programs  and achieve cost savings. Its two largest programs—Old-Age and  Survivors Insurance (OASI), which provides retirement benefits, and  Disability Insurance (DI), which provides benefits to individuals who  cannot work because of a disability—together paid out more than $905  billion in fiscal year 2016.
Benefits provided under these programs are subject to several provisions  that offset benefits for individuals who receive both Social Security  benefits and similar benefits under another program, such as state and  local pensions or workers’ compensation. In some of these cases, SSA is  required to offset or reduce the amount it pays to account for these other  benefits. We have reported that SSA could take additional steps to better  enforce these rules and avoid paying duplicative benefits.
Social Security offsets. SSA needs accurate information from state  and local governments on retirees who receive pensions from  employment not covered under Social Security. SSA needs this  information to fairly and accurately apply the Government Pension  Offset (GPO), which generally applies to spouse and survivor  benefits, and the Windfall Elimination Provision (WEP), which applies  to retirement and disability benefits. Congress could consider giving  IRS the authority to collect the information that SSA needs on  government pension income to administer the GPO and the WEP  accurately and fairly. Implementing this action could save $2.4 billion  to $7.9 billion over 10 years, if enforced both retrospectively and  prospectively, based on estimates from CBO and SSA. The estimated  savings would be less if SSA only enforced the offsets prospectively  as it would not reduce benefits already received.
Disability and unemployment benefits. Current law does not  preclude the receipt of overlapping DI and Unemployment Insurance  (UI) benefits. We previously found that 117,000 individuals received  concurrent cash benefit payments, in fiscal year 2010, from these  programs totaling more than $850 million. In 2014, we reported that  Congress should consider passing legislation to require SSA to offset  DI benefits for any UI benefits received in the same period. As of  March 2017, legislation had not been enacted. Several bills, including  the Social Security Disability Insurance and Unemployment Benefits  Double Dip Elimination Act, were introduced in the 114th Congress  that would have prevented concurrent receipt of SSA DI and UI  benefits, as we suggested in our 2014 report. If new legislation is  introduced in the 115th Congress and enacted, the change could save  $1.9 billion over 10 years in the DI program, according to CBO.
SSA’s DI program requires beneficiaries to meet certain medical and  financial requirements in order to maintain eligibility for benefits. We have  identified a number of opportunities for SSA to save money by improving  its ability to determine whether beneficiaries have regained the ability to  work, and if working, gather information on wages to avoid improper  payments to beneficiaries earning above program limits.
Disability Insurance overpayments. DI overpayments often result  when a beneficiary returns to work and starts earning income above a  certain level, but the earnings activity is not properly reported to or  processed by SSA. We estimated that SSA overpaid individuals $11.5  billion during fiscal years 2005 through 2014 because their work  activity resulted in earnings that exceeded program limits. SSA may  waive overpayments under some circumstances, in which case  collection of the debt is terminated, and allows flexibility to  administratively waive low dollar amounts.
In October 2015, we identified several weaknesses in SSA’s process  for handling work reports and waivers, and we made several  recommendations—including that SSA study the costs and benefits of  automated reporting options to enhance the ease and integrity of the  work reporting process and take additional steps to ensure  compliance with waiver policies, including updating its Debt  Management System to ensure waivers over $1,000 are not  improperly waived. SSA agreed with this recommendation. Regarding  work reporting, SSA was drafting business processes as of March  2017 to (1) build an Internet and telephone wage reporting system for  DI beneficiaries and (2) contract with third-party payroll providers to  receive monthly earnings data that will allow SSA to automatically  make benefit adjustments. Until these new processes are  implemented, the incidence of overpayments will likely remain high  due to the lack of convenient reporting options for beneficiaries, failure  of beneficiaries to self-report, and SSA processing errors. Regarding  waivers, SSA had not updated its Debt Management System as of  March 2017, and commented that it lacks the funds to do so. Fully  implementing these recommendations would help prevent the loss of  billions of dollars, by preventing overpayments in the first place, as  well as improper waivers of overpayments, once they occur.
Disability reviews. SSA is generally required to conduct continuing  disability reviews (CDR) to determine whether DI and Supplemental  Security Income recipients remain eligible for benefits based on their  medical condition and ability to work. In February 2016, we reported  that SSA’s process for targeting CDRs does not maximize potential  savings for the government. We recommended that SSA further  consider cost savings when prioritizing reviews. SSA partially agreed  with our recommendation, stating that, although it could do more to  increase the return on its CDRs, the agency’s statistical models and  prioritization process already do much of what was recommended.  However, we believe that SSA could refine its prioritization process by  factoring in actuarial considerations in addition to its existing statistical  models. SSA had not taken action as of February 2017. If SSA further  incorporates cost savings into its process for prioritizing CDRs to  conduct, the agency could realize greater savings by targeting cases  with the highest average potential savings among those with the  highest likelihood of benefit cessation.
section_title: Office of Management and Budget
paragraphs: Many of the results the federal government seeks to achieve require the  coordinated effort of more than one federal agency, level of government,  or sector. OMB manages and coordinates many government-wide efforts  and its involvement is critical in continuing to make progress in improving  efficiency and effectiveness of government programs. OMB also plays a  critical role in the management of improper payments, tax expenditures,  and the Digital Accountability and Transparency Act of 2014 (DATA Act).
Reducing acquisition costs. Between fiscal years 2011 through  2015, federal agencies spent almost $2 billion through OMB’s federal  strategic sourcing initiatives and achieved an estimated $470 million  in savings. Implementing our recommendations related to federal  acquisitions would help agencies achieve significant savings. In 2016,  we found that OMB and the General Services Administration needed  to take actions to hold federal agencies more accountable for the  results of federal strategic sourcing initiatives. For example, the  seven largest federal agencies that comprised the Leadership  Council—a cohort of large federal agencies responsible for federal  strategic sourcing initiatives governance—directed less than 10  percent of their spending on the types of goods and services offered  under the federal strategic sourcing initiatives in fiscal year 2015. As a  result, they missed the opportunity to potentially have saved $1 billion.  OMB generally agreed with these recommendations. It is important  that OMB continue to expand this approach to other high-spend  categories in a timely fashion to help agencies reap billions of dollars  in potential savings.
Information technology investment portfolio management.  Federal agencies spend billions of dollars each year to meet their  increasing demand for information technology (IT). In March 2012,  OMB launched an initiative, referred to as PortfolioStat, to maximize  the return on IT investments across the government’s  portfolio. PortfolioStat is designed to assist agencies in assessing the  current maturity of their IT investment management process, making  decisions on eliminating duplicative investments, and moving to  shared solutions (such as cloud computing) within and across  agencies.
In 2013, we made several recommendations to OMB regarding the  PortfolioStat initiative. For example, we recommended that OMB  direct the Federal Chief Information Officer to improve transparency of  and accountability for PortfolioStat by publicly disclosing planned and  actual data consolidation efforts and related cost savings by agency.  While OMB disagreed with the recommendation, as of March 2017,  OMB had taken steps to improve transparency of and accountability  for PortfolioStat by displaying actual data consolidation savings data  on the federal information technology dashboard. However, OMB  stated that it does not track planned cost savings and cost avoidance  figures and did not provide any plans to do so. OMB’s continued  attention in addressing this recommendation and our government- wide high-risk area Improving the Management of IT Acquisitions and  Operations is essential to enabling agencies to demonstrate progress  in improving their portfolios of IT investments. Improving the  transparency and accountability for PortfolioStat by publicly disclosing  both planned and actual data consolidation efforts and related cost  savings by agency would provide stakeholders, including Congress  and the public, a means to monitor agencies’ progress and hold them  accountable for reducing duplication and achieving cost savings. Fully  implementing the actions in this area could result in billions of dollars  in additional savings.
Federal data center consolidation. Over time, the federal  government's increasing demand for IT has led to a dramatic rise in  the number of federal data centers (defined as data processing and  storage facilities over 500 square feet with strict availability  requirements) and a corresponding increase in operational costs. In  2011, we identified the need for OMB to work with agencies to  establish goals and targets for consolidation (both in terms of cost  savings and reduced data centers), maintain strong oversight of the  agencies' efforts, and look for consolidation opportunities across  agencies. Since 2011, OMB has taken steps to look for data center  consolidation opportunities across agencies; however, continued  evidence of agencies not fully reporting their savings demonstrates  the importance of OMB's continued oversight.
As of March 2017, agencies collectively reported having 10,058 data  centers, of which 4,679 were reported closed. Agencies also reported  that they planned to close another 1,358 data centers—for a total of  6,037 closed—by the end of fiscal year 2019. The agencies reported  achieving approximately $2.8 billion in cost savings or avoidances  from their data center consolidation and optimization efforts from fiscal  year 2012 through 2016. Further, as of December 2016, agencies  were planning a total of approximately $378 million in cost savings  between fiscal years 2016 and 2018—significantly less than OMB's  $2.7 billion cost savings goal for agencies to achieve by the end of  fiscal year 2018. Of the recommendations that we made to 10  agencies in March 2016 to complete their planned data center cost  savings targets for fiscal years 2016 through 2018, all remain open.   Going forward, it will be important for OMB to continue to implement  its oversight of agencies' data center consolidation efforts to better  ensure that the consolidation and optimization efforts are meeting  their established objectives.
Geospatial investments. The federal government collects,  maintains, and uses geospatial information linked to specific  geographic locations to help in decision making and to support many  functions, including national security, law enforcement, health care,  and environmental protection. Many activities, such as maintaining  roads and responding to natural disasters can depend on critical  analysis of geospatial information. Further, multiple federal agencies  may provide services at the same geographic locations and may  independently collect similar geospatial information about those  locations.
In 2012, we recommended that OMB develop a mechanism, or modify  existing mechanisms, to identify and report annually on all geospatial- related investments, including dollars invested and the nature of the  investment. In responding to the recommendation at the time of the  report, OMB noted that it developed new analysis tools and updated  its models to improve its ability to identify and report on geospatial- related investments. As of March 2017, OMB has made progress in  developing a way to identify and report annually on all geospatial- related investments, but has not completed its efforts. Better  coordination by agencies and better oversight by OMB could help to  reduce duplication of geospatial investments, providing the  opportunity for potential savings of millions of dollars on the estimated  billions of dollars spent annually on geospatial information technology.
Ensuring the security of federal information systems and cyber  critical infrastructure and protecting the security of personally  identifiable information. Federal agencies and our nation’s critical  infrastructures—such as energy, transportation systems,  communications, and financial services—are dependent on  computerized (cyber) information systems and electronic data to carry  out operations and to process, maintain, and report essential  information. The security of these systems and data is vital to public  confidence and the nation’s safety, prosperity, and well-being.
Protecting the privacy of personally identifiable information (PII) that is  collected, maintained, and shared by both federal and nonfederal  entities is also critical. Regarding PII, advancements in technology,  such as new search technology and data analytics software for  searching and collecting information, lower data storage costs, and  ubiquitous Internet and cellular connectivity have made it easier for  individuals and organizations to correlate data and track it across  large and numerous databases. These advances—combined with the  increasing sophistication of hackers and others with malicious intent,  and the extent to which both federal agencies and private companies  collect sensitive information about individuals—have increased the  risk of PII being exposed and compromised.
Actions initiated by OMB and the Federal Chief Information Officer,  such as the 30-Day Cybersecurity Sprint and the October 30, 2015,  cybersecurity strategy and implementation plan, reflect an increased  level of attention by OMB to the security of federal networks, systems,  and data at civilian agencies. Consistent with our 2015  recommendations for developing a federal cybersecurity strategy,  OMB’s strategy identifies key actions, responsibilities, and timeframes  for implementation as well as mechanisms for tracking progress and  holding individuals accountable. These actions should help federal  agencies stem the rising tide of information security incidents. In  addition, OMB should continue to focus its attention on implementing  our recommendations to (1) address agency cyber incident response  practices in its oversight of agency information security programs and  (2) collaborate with stakeholders to enhance reporting guidance for  the inspector general community. Doing so will enable federal  agencies to better respond to cyber attacks and will provide for more  consistent and useful reporting to the Congress.
Better coordination among programs that support employment  for people with disabilities. In 2010, an estimated one in six  working-age Americans reported having a disability, and the federal  government obligated more than $4 billion in fiscal year 2010 for  employment-related supports for people with disabilities. Lack of  coordination is, in part, why federal disability programs have remained  on our high-risk list since 2003. Meanwhile, SSA paid out almost $196  billion in fiscal year 2015 in income supports for people with  disabilities who cannot work, and historically, people with disabilities  have experienced higher unemployment and poverty rates than those  without disabilities.
In 2012, we found overlap and limited coordination among 45  programs in nine federal agencies that support employment for people  with disabilities—programs that have been created or have evolved  over time to address barriers in employment for people with  disabilities, resulting in a fragmented system of supports. To improve  coordination and spur more efficient and economical service delivery  in overlapping program areas, OMB should consider establishing  measurable, governmentwide goals for employment of people with  disabilities, and agencies should establish related measures and  indicators and collect additional data to ensure goals are being met.  Establishing such goals and related measures could further enhance  coordination and help improve employment outcomes for people with  disabilities, including finding or maintaining employment outside of the  federal government.
section_title: Multiple Strategies Needed to Address the Persistent Tax Gap
paragraphs: The tax gap—the difference between taxes owed to the government and  total taxes paid on time—has been a persistent problem for decades  despite the Internal Revenue Service’s (IRS) efforts to improve voluntary  compliance. In 2016, IRS estimated that for tax years 2008 to 2010, the  voluntary compliance rate averaged 81.7 percent of taxes owed, resulting  in an average annual gross tax gap of $458 billion. After accounting for an  estimated $52 billion in late payments and payments resulting from IRS  enforcement actions, the net compliance rate averaged 83.7 percent of  taxes owed, resulting in an annual average net tax gap of $406 billion for  those years.
The largest part of the tax gap is from underreporting, when taxpayers  inaccurately report tax liabilities on tax returns. (See figure 11.) Other  forms of noncompliance are underpayment, when taxpayers fail to pay  taxes due from filed returns, or nonfiling, when they fail to file a required  tax return altogether or on time.
We have identified actions IRS and Congress can take to reduce the tax  gap. For example, we recommended that IRS collect more data on  noncompliance and determine resource allocation strategies for its  enforcement efforts, such as for partnerships; strengthen referral  programs so whistleblowers can more easily submit information to IRS  about tax noncompliance; and enhance taxpayer services, such as by  developing a long-term strategy for providing web-based services to  taxpayers.
Likewise, Congress could help address the tax gap by expanding third- party information reporting requirements, requiring additional taxpayers to  file tax and information returns electronically, regulating paid tax return  preparers, and, as previously discussed, providing IRS with broad  authority to correct errors where there are inconsistencies within a  taxpayer’s tax return.
section_title: Action Needed to Improve Information on Programs and Fiscal Operations
paragraphs: In many cases, agencies also need to take action to provide decision  makers with additional or improved information on the performance and  costs of policies or programs. In particular, decision making could be  improved by strengthening internal controls over financial reporting to  ensure the statements are fully auditable, increasing attention to tax  expenditures, and effectively implementing the DATA Act.
Ensuring the federal government’s financial statements are fully  auditable. Eliminating these weaknesses would improve the reliability  of financial information and improve financial decision making. The  U.S. government’s consolidated financial statements are intended to  present the results of operations and the financial position of the  federal government as if the government were a single enterprise.  Since the federal government began preparing consolidated financial  statements 20 years ago, three major impediments have continued to  prevent us from rendering an opinion on the federal government’s  accrual-based consolidated financial statements over this period: (1)  serious financial management problems at DOD that have prevented  its financial statements from being auditable, (2) the federal  government’s inability to adequately account for and reconcile  intragovernmental activity and balances between federal entities, and  (3) the federal government’s ineffective process for preparing the  consolidated financial statements.
Over the years, we have made a number of recommendations to  OMB, Treasury, and DOD to address these issues. Generally, these  entities have taken or plan to take actions to address these  recommendations. The material weaknesses in internal control  underlying these three major impediments continued to (1) hamper  the federal government’s ability to reliably report a significant portion  of its assets, liabilities, costs, and other related information; (2) affect  the federal government’s ability to reliably measure the full cost, as  well as the financial and nonfinancial performance of certain programs  and activities; (3) impair the federal government’s ability to adequately  safeguard significant assets and properly record various transactions;  and (4) hinder the federal government from having reliable financial  information to operate in an efficient and effective manner.
Increased attention to tax expenditures. Tax expenditures are  sometimes used to provide economic relief to selected groups of  taxpayers or to encourage certain behavior or to accomplish other  goals. The goals they seek to advance may be similar to the goals of  mandatory or discretionary spending programs. According to  Treasury, in fiscal year 2016 there were 167 tax expenditures. These  tax expenditures represented an estimated total of $1.4 trillion in  forgone tax revenue.
However, despite their use as a policy tool, tax expenditures are not  regularly reviewed, and their outcomes are not measured as closely  as those from spending programs. We recommended that OMB take  actions to develop a framework for evaluating tax expenditure  performance and to regularly review tax expenditures in executive  branch budget and performance review processes. However, OMB  has not developed a systematic approach for conducting such reviews  and has not reported progress on addressing data availability and  analytical challenges in evaluating tax expenditures since the  President’s fiscal year 2012 budget.
In July 2016 we recommended that OMB work with agencies to  identify which tax expenditures contribute to agency goals, and OMB  generally agreed with the recommendation. Absent such analysis,  policymakers have little way of knowing whether these tax provisions  support achieving the intended federal outcomes and lack information  to compare their cost and efficacy with other policy tools.
Effective implementation of the DATA Act. We have reported that  the DATA Act holds great promise for improving the transparency and  accountability of federal spending data. Full and effective  implementation of the act would enable—for the first time—the federal  government as a whole to report on funds at multiple points in the  federal spending lifecycle and significantly increase the types and  transparency of data available to Congress, agencies, and the general  public. OMB and Treasury have taken significant steps toward  implementing the DATA Act’s various requirements, but agencies  have reported that they continue to face challenges, including issues  involving systems integration, lack of resources, evolving and complex  reporting requirements, and inadequate guidance.
As agencies begin to report data required by the act in May 2017,  attention will increasingly focus on the quality of the data being  produced. Prior agency financial audits and inspectors general  reviews have identified material weaknesses and significant  deficiencies that present risks to agencies’ ability to submit quality  data. We also identified challenges with guidance that will impact  data quality and limitations with the processes to provide and  communicate needed quality assurances to users. Moving forward,  OMB and Treasury need to continue to address issues that we  identified in our previous work as well as our open recommendations  related to implementation of the act and data transparency.
The government must act soon to change the long-term fiscal path or risk  significant disruption to individuals and the economy. Congress will need  to discuss the entire range of federal activities and spending—entitlement  programs, other mandatory spending, discretionary spending, and  revenue. Moving forward, the federal government will need to make tough  choices in setting priorities and ensuring that spending leads to positive  results. Having a broader fiscal plan to put the federal government on a  more sustainable long-term path would help with these tough decisions.
Thank you, Chairman Black, Ranking Member Yarmuth, and Members of  the Committee, this concludes my prepared statement. I would be  pleased to answer questions.
section_title: GAO Contacts
paragraphs: For further information on this testimony, please contact Susan J. Irving,  Director of Federal Budget Analysis, Strategic Issues, who may be  reached at (202) 512-6806 or irvings@gao.gov, and J. Christopher Mihm,  Managing Director, Strategic Issues, who may be reached at (202) 512- 6806 or mihmj@gao.gov. Contact points for the individual areas listed in  our 2017 Fragmentation, Overlap, and Duplication annual report can be  found on the first page of each area in GAO-17-491SP. Contact points for  the individual high-risk areas are listed in GAO-17-317 and on our high- risk website. Contact points for our Congressional Relations and Public  Affairs offices may be found on the last page of this statement.
section_title: Appendix I: Related GAO Work
subsections: section_title: Long-Term Fiscal Outlook
paragraphs: The Nation’s Fiscal Health: Action is Needed to Address the Federal  Government’s Fiscal Future. GAO-17-237SP. Washington, D.C.:  January 17, 2017.
GAO, Fiscal Outlook & The Debt Key Issues Page, accessed April 28,  2017, http://www.gao.gov/fiscal_outlook/overview.
Fiscal Outlook: Addressing Improper Payments and the Tax Gap  Would Improve the Government’s Fiscal Position. GAO-16-92T.  Washington, D.C.: October 1, 2015.
Social Security’s Future: Answers to Key Questions. GAO-16-75SP.
Washington, D.C.: October 27, 2015.
section_title: Improper Payments
paragraphs: Improper Payments: CFO Act Agencies Need to Improve Efforts to  Address Compliance Issues. GAO-16-55. Washington, D.C.: June 30,  2016.
Improper Payments: Government-Wide Estimates and Use of Death  Data to Help Prevent Payments to Deceased Individuals.  GAO-15-482T. Washington, D.C.: March 16, 2015.
Disaster Relief: Agencies Need to Improve Policies and Procedures  for Estimating Improper Payments. GAO-15-209. Washington, D.C.:  February 27, 2015.
Improper Payments: TRICARE Measurement and Reduction Efforts  Could Benefit from Adopting Medical Record Reviews. GAO-15-269.  Washington, D.C.: February 18, 2015.
Improper Payments: DOE’s Risk Assessments Should Be  Strengthened. GAO-15-36. Washington, D.C.: December 23, 2017.
Improper Payments: Inspector General Reporting of Agency  Compliance under the Improper Payments Elimination and Recovery  Act. GAO-15-87R. Washington, D.C.: December 9, 2014.
Improper Payments: Government-Wide Estimates and Reduction  Strategies. GAO-14-737T. Washington, D.C.: July 9, 2014.
section_title: Tax Gap
paragraphs: Partnerships and S Corporations: IRS Needs to Improve Information  to Address Tax Noncompliance. GAO-14-453. Washington, D.C.: May  14, 2014.
Paid Tax Return Preparers: In a Limited Study, Preparers Made  Significant Errors. GAO-14-467T. Washington, D.C.: April 8, 2014.
Tax Gap: IRS Could Significantly Increase Revenues by Better  Targeting Enforcement Resources. GAO-13-151. Washington, D.C.:  December 5, 2012.
Tax Gap: Sources of Noncompliance and Strategies to Reduce It.
GAO-12-651T. Washington, D.C.: April 19, 2012.
section_title: Debt Limit
paragraphs: Debt Limit: Market Response to Recent Impasses Underscores Need  to Consider Alternative Approaches. GAO-15-476. Washington, D.C.:  July 9, 2015.
Debt Limit: Analysis of 2011-2012 Actions Taken and Effect of  Delayed Increase on Borrowing Costs. GAO-12-701. Washington,  D.C.: July 23, 2012.
The Effects of Delays in Increasing the Debt Limit Podcast, accessed  April 28, 2017, http://www.gao.gov/multimedia/podcasts/592827.
Debt Limit Alternative Approaches Podcast, accessed April 28, 2017,  http://www.gao.gov/multimedia/podcasts/670669.
section_title: Consolidated Financial Statement
paragraphs: Financial Audit: Fiscal Years 2016 and 2015 Consolidated Financial  Statements of the U.S. Government. GAO-17-283R. Washington,  D.C.: January 12, 2017.
Understanding the Primary Components of the Annual Financial  Report of the United States Government. GAO-09-946SP.  Washington, D.C.: September 25, 2009.
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