The Improper Payments Information Act of 2002 (IPIA)—as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA)—requires federal executive branch agencies to (1) review all programs and activities, (2) identify those that may be susceptible to significant improper payments,amount of improper payments for those programs and activities, (4) implement actions to reduce improper payments and set reduction targets, and (5) report on the results of addressing the foregoing requirements. IPERA also established a requirement for agency inspectors general (IG) to report annually on agencies’ compliance with criteria listed in IPERA. Under Office of Management and Budget (OMB) implementing guidance, these reports should be completed within 120 (3) estimate the annual days of the publication of the federal agencies’ annual PARs or AFRs. IPERIA also enacted into law a Do Not Pay (DNP) initiative, elements of which were already being developed under executive branch authority. DNP is a web-based, centralized data-matching service that allows agencies to review multiple databases to determine a recipient’s award or payment eligibility prior to making payments. In addition to the laws and guidance noted above, the Disaster Relief Appropriations Act of 2013 requires that all funding received under the act be deemed susceptible to significant improper payments and consequently requires agencies to estimate improper payments, implement corrective actions, and report on their results for these funds. OMB continues to play a key role in the oversight of government-wide improper payments. OMB has set a goal of reaching a government-wide improper payment error rate of 3 percent or less by the end of fiscal year 2016. Further, OMB has established guidance for federal agencies on reporting, reducing, and recovering improper payments as required by IPIA and IPERA and on protecting privacy while reducing improper IPERIA requires that OMB issue payments with the DNP initiative. guidance to agencies for improving estimates of improper payments. OMB has reported that it plans to revise its guidance related to improper payments. Office of Management and Budget, Revised, Financial Reporting Requirements, OMB Circular No. A-136 (Oct. 21, 2013); Protecting Privacy while Reducing Improper Payments with the Do Not Pay Initiative, OMB Memorandum M-13-20 (Washington, D.C.: Aug. 16, 2013); Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123, OMB Memorandum M-11-16 (Washington, D.C.: Apr. 14, 2011); Increasing Efforts to Recapture Improper Payments by Intensifying and Expanding Payment Recapture Audits, OMB Memorandum M-11-04 (Washington, D.C.: Nov. 16, 2010); and Issuance of Part III to OMB Circular A-123, Appendix C, OMB Memorandum M-10-13 (Washington, D.C.: Mar. 22, 2010). Federal agency improper payment estimates totaled $105.8 billion in fiscal year 2013, a decrease of $1.3 billion from the prior year’s revised estimate of $107.1 billion. The decrease in the fiscal year 2013 estimate is attributed primarily to a decrease in program outlays for the Department of Labor’s (DOL) Unemployment Insurance program and decreases in reported error rates for fiscal year 2013 for the Department of Health and Human Services’ (HHS) Medicaid and Medicare Advantage (Part C) programs. The $105.8 billion in estimated federal improper payments reported for fiscal year 2013 was attributable to 84 programs spread among 18 agencies. Five of these 84 programs account for most of the $105.8 billion of reported improper payments. Specifically, these five programs accounted for about $82.9 billion or 78 percent of the total estimated improper payments agencies reported for fiscal year 2013. Table 1 lists the five programs with the highest reported improper payment estimates for fiscal year 2013. OMB reported a government-wide improper payment error rate of 3.5 percent of program outlays in fiscal year 2013 when including the Department of Defense’s (DOD) Defense Finance and Accounting Service (DFAS) Commercial Pay program, a decrease from 3.7 percent in fiscal year 2012. When excluding the DFAS Commercial Pay program, the reported government-wide error rate was 4.0 percent of program outlays in fiscal year 2013 compared to the revised 4.3 percent reported in fiscal year 2012. In May 2013, we reported on major deficiencies in DOD’s process for estimating fiscal year 2012 improper payments in the DFAS Commercial Pay program and recommended that DOD (1) develop key quality assurance procedures to ensure the completeness and accuracy of sampled populations and (2) revise its sampling procedures to meet OMB guidance and generally accepted statistical standards and produce a statistically valid error rate and dollar estimate with appropriate confidence intervals. According to its fiscal year 2013 AFR, DOD is reevaluating its sampling methodology for fiscal year 2014 for the DFAS Commercial Pay program based on our recommendations. Consequently, the fiscal year 2013 improper payment estimate for the DFAS Commercial Pay program may not be reliable. Additionally, in fiscal year 2013, federal agencies reported improper payment error rates for seven risk-susceptible programs—accounting for more than 50 percent of the government-wide improper payment estimate—that exceeded 10 percent. As shown in table 2, the seven programs with error rates exceeding 10 percent ranged from 10.1 percent to 25.3 percent. Under IPERA, an agency reporting an improper payment rate of 10 percent or greater for any risk-susceptible program or activity must submit a plan to Congress describing the actions that the agency will take to reduce improper payment rates below 10 percent. Since the implementation of IPIA in 2004, federal agencies have continued to identify new programs or activities as risk susceptible and to report estimated improper payment amounts. Federal agencies have also identified programs or activities that they have determined to no longer be risk susceptible and therefore did not report improper payment estimates for these programs. For example, with OMB approval an agency can obtain relief from estimating improper payments if the agency has reported improper payments under the threshold for significant improper payments at least 2 consecutive years. Consequently, the specific programs included in the government-wide improper payment estimate may change from year to year. For example, a net of 10 additional programs were added to the government-wide estimate by OMB in fiscal year 2013 when compared to fiscal year 2012.Department of Education’s improper payment estimate for the Direct Loan program, approximately $1.1 billion, was included in the government-wide improper payment estimate for the first time in fiscal year 2013. We view Most notably, the these agencies’ efforts as a positive step toward increasing the transparency of the magnitude of improper payments. In addition, agencies have continued efforts to recover improper payments, for example through recovery audits. OMB reported that government-wide, agencies recovered over $22 billion in overpayments through recovery audits and other methods in fiscal year 2013. In our fiscal year 2013 audit of the Financial Report of the United States Government, we reported the issue of improper payments as a material weakness in internal control 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.the agency level, we also found that existing internal control weaknesses—such as financial system limitations and information system control weaknesses—heighten the risk of improper payments occurring. We found that not all agencies have developed improper payment estimates for all of the programs and activities they identified as susceptible to significant improper payments. Specifically, four federal agencies did not report fiscal year 2013 estimated improper payment amounts for four risk-susceptible programs. For example, HHS’s fiscal year 2013 reporting cited statutory limitations for its state-administered Temporary Assistance for Needy Families (TANF) program, which prohibited it from requiring states to participate in developing an improper payment estimate for the TANF program. Despite these limitations, HHS reported that the agency has taken actions to assist states in reducing improper payments, such as providing guidance related to appropriate uses of TANF program funds. For fiscal year 2013, the TANF program reported outlays of about $16.5 billion. In addition, two programs that reported estimates in fiscal year 2013 were not included in the government-wide totals because their estimation methodologies were not approved by OMB. The two excluded programs were the Department of Transportation’s High-Speed Intercity Passenger Rail program, with fiscal year 2013 outlays of $2.3 billion, and the Railroad Retirement Board’s Railroad Unemployment Insurance program, with fiscal year 2013 outlays of $119.2 million. Compliance with statutory requirements is another challenge for some federal agencies. For fiscal year 2013, two agency auditors reported on compliance issues with IPIA and IPERA as part of their 2013 financial statement audits. Specifically, auditors of the Department of Agriculture (USDA) reported noncompliance with the requirements of IPERA regarding the design of program internal controls related to improper payments. HHS auditors reported that, as previously noted, HHS did not report an improper payment estimate for its TANF program for fiscal year 2013. In addition to noncompliance reported in financial statement audits, various IGs reported deficiencies related to compliance with the criteria listed in IPERA for fiscal year 2013 at their respective federal agencies, including risk-susceptible programs that did not have reported improper payment estimates, estimation methodologies that were not statistically valid, and risk assessments that may not accurately assess the risk of improper payment.