OMB plays data matchmaker to combat rise in improper payments

David Mader, OMB controller, said the administration will target specific agencies with new technology to access more data to combat this long-standing challeng...

The government’s improper payment rate jumped 14 percent in fiscal 2014.

The Government Accountability Office said the increase comes from many of the major programs, including the Centers for Medicare and Medicaid Services’ Medicare Fee for Service and Medicaid, the Labor Department’s Unemployment Insurance, the IRS’ Earned Income Tax Credit and the Social Security Administration’s Supplemental Security Income.

In its annual audit of the government’s consolidated financial statement released Feb. 26, GAO said the rate climbed to 4.02 percent in 2014, up from 3.53 percent last year. Auditors say agencies reported a total of $124.7 billion in improper payments, up from about $106 billion last year.

This is the first increase in the governmentwide rate since 2008.

David Mader, the controller in the Office of Management and Budget, said in an interview before the GAO reported the increase that no matter which direction the improper payment rate went in 2014, the administration is taking new actions to further address this long-standing problem.

“One of the things that we need to do this year, and we are about to launch this initiative, is selectively talk to a couple of departments about additional analysis around the whole improper payments within their particular sphere of responsibility. We need to do a better job, and we are actually making some amendments to some OMB guidance along this line, see if additional analysis would help us better identify some of the root causes about why payments are improper,” Mader said in part two of his exclusive interview with Federal News Radio. “OMB will be working closely with several of the departments over the course of 2015 to see if we can better understand what is driving the improper payment rate, and then stepping back and saying to ourselves, ‘Can we mitigate that risk, because it is a risk, by changing business processes, introducing technology, bringing in new data to look at and/or do we need some legislative fixes?'”

Mader said President Barack Obama has asked for help from Congress over the last several years in his annual budget request to help agencies implement policy and process changes to drive down the rate further. OMB also updated Circular A-123, Appendix C in October detailing new internal controls and an approach to rate each program across five factors.

Better reporting by agencies

Congress also continues to pay close attention to this issue. After passing two bills early in Obama’s term, the Senate Homeland Security and Governmental Affairs Committee passed the Federal Improper Payments Coordination Act of 2015 March 4 that would improve existing programs, requirements and procedures established to identify and prevent improper payments, the committee said in a release.

Since 2009, the Obama administration said the improper payment rate dropped almost two percentage points from 5.42 percent to 3.53 percent. But the overall dollar figure has hovered between $120 billion and $106 billion.

GAO said one reason for the rate increase in 2014 could be tied to better reporting by agencies.

“While the specific programs included in the governmentwide improper payment estimate may change from year to year, a net of 40 additional programs were included when compared to fiscal year 2013, most of which pertain to funds received under the Disaster Relief Appropriations Act, 2013,” GAO stated in its report. “Nevertheless, two federal entities did not report fiscal year 2014 estimated improper payment amounts for four risk-susceptible programs, including HHS’s Temporary Assistance for Needy Families.”

Over the next nine months, OMB will emphasize the Do Not Pay List and other data analytics tools to ensure agencies are making better decisions about whom they are paying.

“[Do Not Pay is] enhancing the governmentwide databases that they are able to bring together,” Mader said. “They are basically a shared service. They are saying to agencies, ‘Before you make a payment, bring us the identity of that payment and let us tell you through analysis whether there are any issues there and flag them. We don’t know if there is an issue, but there could be, and then you, agency, take the necessary actions.’ So enhancing, and that’s another example of requests for legislative help to allow Do Not Pay to expand those databases they have available and to enhance the analysis they can do in support of agencies.”

GAO said the advanced data analytics helped the government recover about $20 billion in improper payments last year.

“[A]s part of the President’s Do Not Pay Initiative, the administration established a Do Not Pay System of Records at the Department of the Treasury and the Administration looks forward to continuing the administration’s work with the new Congress on the Improper Payments Agency Cooperation Enhancement Act (IPACE Act), which includes many of the administration priorities on sharing death data to prevent improper payments,” GAO stated. “Another significant improper payment data analytics effort includes the Centers for Medicare & Medicaid Services’ (CMS) Fraud Prevention System (FPS), a state-of-the-art predictive analytics technology to identify and prevent fraud in the program. Finally, the Department of Labor continued a Federal-State partnership with state governments through the Unemployment Insurance (UI) Integrity Center for Excellence to facilitate the development and implementation of UI integrity tools by the States and to share best practices in the detection and reduction of improper payments.”

No cookie-cutter approach to risk management

Mader said stopping overpayments and fraud are two of the three focus areas around improper payments. He said underpayments also are a concern because it means citizens or businesses are not getting what they deserve.

He said agencies must continue to use technology to stop improper payments more quickly.

“The Recovery Operations Center has been using leading edge or cutting edge data analytics, and we need to get that out to all the agencies. It shouldn’t be just contained in the ROC or Do Not Pay,” he said. “There are some agencies that have been out there doing that, acquiring not only the software to do the analysis but also getting the people. This is a skill set. You want people who are sophisticated data analysts who can merge a variety of different data sets that can build the kinds of filters and algorithms that you want to put on the front end of a lot of these processes. So it’s people and it’s technology.”

Reducing and stopping improper payments is one of several programmatic risks agencies must address.

Traditionally, OMB has pressed agencies to focus on financial risks through Circular A-123.

Mader said the administration will update the document later this year to take a more holistic view of risk management. Along with A-123, OMB is preparing new guidance to give agencies a framework to measure and mitigate all kinds of risks later this calendar year

“We’ve done an inventory of who has risk officers. What’s interesting is when you look at across the landscape and you see the different organizations who have risk officers, they put them in place for different reasons and when you look at the scope, they have different scopes,” he said. “One of the things we want to recognize, every department and every bureau is unique. I don’t think when we are dealing with risk we want to have a one-size-fits-all cookie cutter and mandate everybody needs to have a risk officer. I think we need to leave it to the secretary and the deputy secretary to assess their particular situation against this framework and say, ‘for me in department X, it makes sense to have this kind of structure and that kind of structure would be focused on the following things.'”

Mader said OMB’s goal with this guidance is for every agency to identify risks and creating mitigation plans.

“We are still exploring how we will roll this out,” he said. “I just want to give departments the flexibility to apply these principles in a way that makes sense. Sometimes if you just say, ‘You have to have this,’ I’m not sure it will meet the needs of a particular department.”


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