[Senate Report 107-333]
[From the U.S. Government Publishing Office]
107th Congress Report
SENATE
2d Session 107-333
======================================================================
IMPROPER PAYMENTS INFORMATION ACT
OF 2002
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
to accompany
H.R. 4878
TO PROVIDE FOR ESTIMATES AND REPORTS OF IMPROPER PAYMENTS BY FEDERAL
AGENCIES
November 4, 2002.--Ordered to be printed
Filed, under authority of the order of the Senate of October 17, 2002
COMMITTEE ON GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri JIM BUNNING, Kentucky
MARK DAYTON, Minnesota PETER G. FITZGERALD, Illinois
Joyce A. Rechtschaffen, Staff Director and Counsel
Susan E. Propper, Counsel
Richard A. Hertling, Minority Staff Director
Mason C. Alinger, Minority Professional Staff Member
Darla D. Cassell, Chief Clerk
C O N T E N T S
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Page
I. Purpose and Summary..............................................1
II. Background.......................................................1
III Discussion of Legislation........................................2
IV Legislative History..............................................3
V. Section-by-Section Analysis......................................3
VI. Evaluation of Regulatory Impact..................................4
VII. CBO Cost Estimate................................................4
VIII.Changes to Existing Law..........................................5
107th Congress Report
SENATE
2d Session 107-333
======================================================================
IMPROPER PAYMENTS INFORMATION ACT OF 2002
_______
November 4, 2002.--Ordered to be printed
_______
Filed, under authority of the order of the Senate of October 17, 2002
Mr. Lieberman, from the Committee on Governmental Affairs, submitted
the following
R E P O R T
[To accompany H.R. 4878]
The Committee on Governmental Affairs, to which was
referred the bill (H.R. 4878) to provide for estimates and
reports of improper payments by Federal agencies, reports
favorably thereon with an amendment in the nature of a
substitute and recommends that the bill as amended do pass.
I. PURPOSE AND SUMMARY
H.R. 4878 as amended requires federal agencies to identify
programs that are vulnerable to improper payments and to
estimate annually the amount of underpayments and overpayments
made by these programs, whether by the agency or through a
contractor or other third party administering the program.
``Improper payments'' are defined to include any payments that
should not have been made or were made in an incorrect amount.
They include any payments to ineligible recipients, payments
for an ineligible service, duplicate payments, payments for
services not received, and payments that do not account for
credit for applicable discounts. Under H.R. 4878 as amended,
the agency will have to take steps to reduce the amount of
improper payments for any program with improper payment
estimates that exceed $10 million.
II. BACKGROUND
Federal agencies make billions of dollars in improper
payments each fiscal year. Using estimates voluntarily provided
by some agencies, the General Accounting Office (GAO) has
reported that improper payments of between $19 billion and
$20.7 billion were made in fiscal years 1999, 2000 and 2001.
According to GAO, these improper payments include ``inadvertent
errors, such as duplicate payments and calculation errors;
payments for unsupported or inadequately supported claims;
payments for services not rendered or rendered to ineligible
beneficiaries; and payments resulting from fraud and abuse.''
Coordinated Approach Needed to Address the Government's
Improper Payments Problems, GAO-02-749, August 9, 2002, p. 1.
Since there is no current requirement to report the amount of
improper payments, GAO believes that these voluntarily-provided
figures ``do not present a true picture of the level of
improper payments in federal programs and activities. As
significant as the $19 billion in improper payments [reported
for fiscal year 2001] is, the actual extent of improper
payments government-wide is unknown, is likely to be billions
of dollars more, and will likely grow in the future without
concerted and coordinated efforts by agencies, the
administration, and the Congress.'' Id., p.3.
In October, 2001, GAO issued an Executive Guide prepared at
Senator Lieberman's request, Strategies to Manage Improper
Payments, GAO-02-69G. This Guide provided best practices
recommendations for federal agencies to consider when
developing strategies and planning and implementing actions to
manage improper payments in their programs. A key step
identified in the Guide is determining the nature and extent of
the risks of improper payments. This includes estimating the
total amount of improper payments made, as well as identifying
the areas of highest risk for such payments so that corrective
efforts can be aimed at those areas.
H.R. 4878 begins the process of putting these
recommendations into practice by requiring that agencies
annually estimate the amount of improper payments, and report
on the steps they are taking to reduce the amount of those
payments in the largest programs.
III. DISCUSSION OF LEGISLATION
H.R. 4878 as amended requires agencies for the first time
to review annually their programs and activities and identify
those that may be susceptible to improper payments, using
guidelines prescribed by the Office of Management and Budget
(OMB). For each program, the agency must estimate the annual
amount of improper payments made and submit that estimate to
Congress. H.R. 4878 as amended also requires agencies to report
on the steps they are taking to reduce improper payments for
each program with estimated improper payments that exceed $10
million and requires OMB to issue guidelines to implement this
legislation within 6 months after enactment. The requirement to
estimate and report on improper payments begins with agencies'
administration of programs in fiscal year 2003; these estimates
and other required information must be included in agency
budget submissions for fiscal year 2004 and thereafter.
The Committee notes that this legislation is intended to
improve the accountability of federal agencies' administration
of federal tax dollars. The annual program reviews and
annualestimates of improper payments should not be construed as a
requirement for agencies to perform annual payment audits of their
contractors.
IV. LEGISLATIVE HISTORY
H.R. 4878 was introduced in the House of Representatives by
Representative Horn on June 6, 2002. The bill was co-sponsored
by a bipartisan group of Representatives. It was marked up by
the Subcommittee on Governmental Efficiency, Financial
Management and Intergovernmental Relations of the Committee on
Government Reform on June 18, 2002 with a substitute amendment
offered by Representative Horn that changed the title and
removed language that would have required agencies to set
annual goals for reducing improper payments. The bill was
passed by the House under suspension of the rules on July 9,
2002 by voice vote.
The bill was received by the Senate on July 11, 2002 and
referred to the Committee on Governmental Affairs. At the
Committee's markup of October 9, 2002, the bill was reported
out by a roll call vote of 9-0, with a Thompson/Lieberman
substitute amendment. Members present were Levin, Akaka,
Durbin, Torricelli, Cleland, Carper, Carnahan, Dayton and
Lieberman. The substitute makes clear that agencies are to
report their estimates of improper payments to Congress in a
uniform manner specified by OMB; revises the threshold for
identifying programs for which agencies must report the actions
they have taken; requires that agencies report the causes of
improper payments, the actions taken to correct those causes
and the results; and requires OMB to issue its guidance to
agencies within 6 months after the date the legislation is
enacted.
V. SECTION-BY-SECTION ANALYSIS
Section 1 entitles the Act as the ``Improper Payments
Information Act of 2002.''
Section 2 requires each agency to review annually all
programs and activities that it administers using guidelines
prepared by OMB, and identify those programs and activities
that may be susceptible to improper payments. For each program
and activity administered by the agency, the agency head shall
estimate the annual amount of improper payments and submit the
estimates to Congress by March 31 of the following year, in a
manner prescribed by OMB. If the agency determines that any
program or activity has estimated improper payments exceeding
$10 million, the agency must also report on the actions the
agency is taking to reduce the improper payments. This report
must include a discussion of the causes of the improper
payments, what actions the agency has taken to correct those
causes and the results achieved. The agency must also state
whether it has the information systems and other infrastructure
it needs to reduce improper payments, and if not, what
resources it has requested in its budget submission. Finally,
it must report on what steps the agency has taken to hold its
managers accountable for reducing improper payments.
Section 2 also defines the terms ``agency,'' ``improper
payment,'' and ``payment.'' It provides that this legislation
will apply to agency programs beginning in fiscal year 2003 and
requires the inclusion of improper payment estimates in agency
budget submissions for fiscal year 2004 and thereafter. OMB
must prescribe guidance to implement this legislation no later
than 6 months after the date of enactment of this Act.
VI. EVALUATION OF REGULATORY IMPACT
Paragraph 11(b)(1) of rule XXVI of the Standing Rules of
the Senate requires that each report accompanying a bill
evaluate ``the regulatory impact which would be incurred in
carrying out this bill.''
The enactment of this legislation will not have significant
regulatory impact.
VII. CBO COST ESTIMATE
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 23, 2002.
Hon. Joseph I. Lieberman,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4878, the Improper
Payments Information Act of 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4878--Improper Payments Information Act of 2002
H.R. 4878 would require federal agencies, beginning in
fiscal year 2003, to estimate the amounts of improper payments
made by federal agencies and programs that are susceptible to
significant improper payments. For estimates of improper
payments that exceed $1 million, each agency would prepare a
report that discusses the causes of the improper payments and
specific actions taken to correct the problem. In addition, the
act would designate the Office of Management and Budget as the
agency responsible for providing guidance to identify improper
payments.
CBO estimates that enacting this legislation would not
significantly affect the federal budget. H.R. 4878 would expand
on existing measures designed to address waste, fraud, and
abuse in the Government Performance and Results Act, the
President's Management Agenda for fiscal year 2002, and OMB
Circular A-11.
For most agencies, any impact of H.R. 4878 on spending
would be subject to the availability of appropriated funds;
however, the legislation could also affect direct spending by
agencies not funded through annual appropriations, such as the
Tennessee Valley Authority and the Bonneville Power
Administration. CBO estimates, however, that any change in
spending by these agencies would not be significant.
H.R. 4878 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Matthew
Pickford. This estimate was approved by Peter H. Fontaine,
Deputy Assistant Director for Budget Analysis.
VIII. CHANGES TO EXISTING LAW
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee notes that the
legislation is a free-standing bill that will make no changes
to any existing law.