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 1. 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 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 2 and 3, 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 4). 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 programs that do not report any improper payment estimates or report unreliable or understated estimates, noncompliance issues, fraud, and potentially inaccurate risk assessments. 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 the U.S. Department of Agriculture’s (USDA) Supplemental Nutrition Assistance Program (SNAP). 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. 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. Also, 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, the Improper Payments Elimination and Recovery Act (IPERA) has required agencies’ inspectors general (IG) to annually report on the respective agencies’ compliance under the act. IGs at 15 of the 24 Chief Financial Officers Act (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. Fraud is one specific type of improper payment and is particularly difficult to identify and estimate. Fraud involves obtaining something of value through willful misrepresentation. Whether an act is fraudulent is determined through the judicial or other adjudicative system, which is one reason why fraud is not likely to be part of agencies’ annual improper payment estimates. According to Office of Management and Budget (OMB) guidance, agencies should refer matters involving possible fraudulent activities to the appropriate parties, such as the relevant Office of the Inspector General or the Department of Justice (DOJ). While improper payment estimates are not a measure of fraud, a lack of sufficient supporting documentation may mask the true causes of improper payments—including fraud. When payments lack the appropriate supporting documentation, their validity cannot be determined. It is possible that these payments were for valid purposes, but it is also possible that the lack of documentation could conceal fraudulent activities. For fiscal year 2016, HHS cited documentation errors as a major contributor to improper payments in its Medicare fee-for- service program, such as durable medical equipment and home health claims. We have found that these areas are also vulnerable to fraud, and recent cases continue to raise concerns. The report on the Health Care Fraud and Abuse Control (HCFAC) program for fiscal year 2016 lists several examples of fraud specifically related to durable medical equipment and home health claims, including one case in which a doctor approved and certified in excess of 11,000 Medicare beneficiaries, who were not home bound, for home health care services between 2006 and 2011, resulting in nearly $375 million in fraudulent claims. For fiscal year 2016, HHS and DOJ reported that the federal government won or negotiated over $2.5 billion in health care fraud judgments and settlements through the HCFAC program. In fiscal year 2016, DOJ opened 930 new criminal health care fraud investigations, and HHS IG investigations resulted in 765 criminal actions and 690 civil actions. Table 4 lists other examples of fraud in various programs. Additionally, we have recently reported on antifraud efforts and cases of potential fraud in various programs, including the following examples. In April 2017, we reported that the Social Security Administration (SSA) needed to develop a comprehensive strategic approach to help enhance antifraud activities in its disability programs. Although SSA has taken steps in this area, its new antifraud office is still evolving. SSA has worked to identify and address fraud risks in its disability programs, but it has not yet comprehensively assessed these fraud risks or developed a strategic approach to help ensure its antifraud activities effectively mitigate those risks. Although SSA has several prevention and detection activities in place to address known fraud risks in its disability programs, the agency has not developed and documented an overall antifraud strategy that aligns its antifraud activities to its fraud risks. Without conducting a fraud risk assessment that aligns with leading practices and developing an antifraud strategy, SSA’s disability programs may remain vulnerable to new fraud schemes, and SSA will not be able to effectively prioritize its antifraud activities. Among other things, we recommended that SSA conduct a comprehensive fraud risk assessment for its disability programs and develop a corresponding antifraud strategy. SSA agreed with the recommendations. In August 2014, we identified 28 cases of potential fraud related to Supplemental Nutrition Assistance Program benefits (food stamps).