Frequently Asked Questions

What is an Improper Payment?

Improper payments occur when either:

  • Federal funds go to the wrong recipient,
  • the recipient receives the incorrect amount of funds (either an underpayment or overpayment),
  • documentation is not available to support a payment, or
  • the recipient uses Federal funds in an improper manner.

The term “improper payment” are payments made by the government to the wrong person, in the wrong amount, or for the wrong reason. Although not all improper payments are fraud, and not all improper payments represent a loss to the government, all improper payments degrade the integrity of government programs and compromise citizens’ trust in government. The definition is found in the Improper Payments Elimination and Recovery Act of 2010 (P.L. 111-204) PDF Document and the Office of Management and Budget Circular A-123, Appendix C (OMB M-15-02) PDF Document.

Why is resolving the problem of Improper Payments important?

Simply put, the American citizens deserve to know that their hard earned tax dollars are being spent as efficiently and effectively as possible by the Federal government.  Although not all improper payments are fraud, and not all improper payments represent a loss to the government, all improper payments degrade the integrity of government programs and compromise citizens’ trust in government. 

Under the direction of the Office of Management and Budget (OMB), agencies have identified the programs that are susceptible to significant improper payments, and measured, or are putting in place measurement plans, to determine the estimated amount of improper payments.  By identifying and measuring the problem, and determining the root causes of error, the government is able to focus its resources so that corrective action plans can be thoughtfully developed and successfully carried out.

What causes Improper Payments?

An improper payment can happen for a number of reasons.  Knowing the causes of program error is the essential first step in reducing or eliminating altogether the improper payment.  By understanding the causes of improper payments, agencies can better implement policies and procedures to reduce errors without negatively impacting the people who should be receiving payments from the government.

Prior to FY 2015 reporting, agencies were required to categorize their improper payment estimates into three categories:

(1) documentation and administrative errors;

(2) authentication and medical necessity errors; and

(3) verification errors. 

However, those categories proved to be limited value in determining the root causes of improper payments in most programs.  Therefore, OMB—in consultation with agencies—developed new improper payment categories that expanded on the existing categories and created a more meaningful and useful way to break out root cases for each agency.  These new categories:

(1) prove more pertinent to the vast array of programs across the Federal landscape;

(2) help agencies better present the different categories of improper payments in their programs and the percentage of the total improper payment estimate that each category represents; and

(3) provide more granularity on improper payment estimates—leading to more effective corrective actions at the program level and more focused strategies for reducing improper payments at the government-wide level. 

OMB provided thirteen pre-defined categories for agencies, with the additional option of allowing an agency to create their own category if the thirteen pre-defined categories did not suit their needs.  These new categories were released on October 20, 2014 and agencies were encouraged to implement these new categories immediately in their FY 2014 reporting.  However, FY 2015 marked the first year that the new OMB root causes reporting was required.  The FY 2015 category breakout follows:

(1) Program Design or Structural Issue: A situation in which improper payments are the result of the design of the program or a structural issue.  For example, a scenario in which a program has a statutory (or regulatory) requirement to pay benefits when due, regardless of whether or not all the information has been received to confirm payment accuracy.

(2) Inability to Authenticate Eligibility: A situation in which an improper payment is made because the agency is unable to authenticate eligibility criteria.  Though other scenarios are also possible, here we discuss three likely ways in which this can happen.  First, the inability to authenticate eligibility can happen because no databases or other resources exist to help the agency make a determination of eligibility (for example, the inability to establish that a child lived with a family for a certain amount of time—for the purpose of determining that a family is eligible for a tax credit—because no database exists to do so).  Second, a beneficiary has failed to report information to an agency that is needed for determining eligibility (for example, a beneficiary failing to provide an agency with information on earnings, and the agency does not have access to databases containing the earnings information).  Finally, statutory constraints prevent a program from being able to access information that would help prevent improper payments (for example, not confirming a recipient’s earnings or work status through existing databases due to statutory constraints).

Failure to Verify Data: A situation where the agency (Federal, State, or local), or another party administering Federal dollars, fails to verify appropriate data to determine whether or not a recipient should be receiving a payment, even though such data exist in government or third-party databases.  For reporting purposes, the kind of data in question would include, but are not limited to, the following sub-categories:

(3) Death Data—failure to verify that an individual is deceased, and the agency pays that individual)

(4) Financial Data—failure to verify that an individual’s or household’s financial resources (for example, current income or assets) do not meet the threshold to qualify him or her for a benefit, and the agency makes a benefit payment to that individual or household.

(5) Excluded Party Data—failure to verify that an individual or entity has been excluded from receiving Federal payments, and the agency pays that individual or entity.

(6) Prisoner Data—failure to verify that an individual is incarcerated and ineligible for receiving a payment, and the agency pays that individual.

(7) Other Eligibility Data—any other type of data not already listed above, causing the agency to make an improper payment as a result.

Administrative or Process Errors: Errors caused by incorrect data entry, classifying, or processing of applications or payments.  For example, an eligible beneficiary receives a payment that is too high or too low due to a data entry mistake, or an agency enters an incorrect invoice amount into its financial system.  These types of errors can be made by the following sub-categories:

(8) Federal Agency

(9) State or Local Agency

(10) Other Party —for example, a participating lender, or any other type of organization

(11) Medical Necessity: A situation in which a medical provider delivers a service or item that does not meet coverage requirements for medical necessity (for example, providing a power wheelchair to a patient whose medical record does not support meeting coverage requirements for a power wheelchair).

(12) Insufficient Documentation to Determine: A situation where there is a lack of supporting documentation necessary to verify the accuracy of a payment identified in the improper payment testing sample.  For example, a program does not have documentation to support a beneficiary’s eligibility for a benefit (in this case, the beneficiary may have been eligible, but the documentation is not present to confirm it during the review period).

(13) Other Reason: If none of the above categories apply, include any other reasons for the improper payment under this category—and please explain the reasons in more detail either in footnotes or in the narrative below the table.  In instances where agencies are able to identify improper payments resulting from fraud, they should report those dollar amounts in this row—unless they already report fraud through a mechanism outside of the annual improper payment process (e.g., an annual report to Congress).

Are all Improper Payments fraud?

No.  Contrary to common perception, not all improper payments are fraud (i.e., an intentional misuse of funds).  In fact, the vast majority of improper payments are due to unintentional errors.  For example, an error may occur because a program does not have documentation to support a beneficiary’s eligibility for a benefit, or an eligible beneficiary receives a payment that is too high—or too low—due to a data entry mistake.

Also, many of the overpayments are payments that may have been proper, but were labeled improper due to a lack of documentation confirming payment accuracy.  We believe that if agencies had this documentation, it would show that many of these overpayments were actually proper and the amount of improper payments actually lost by the government would be even lower than the estimated net loss discussed above.

 

How does someone report suspected incidents of waste, fraud, and abuse related to Improper Payments?

This website also provides information on where the public can report suspected incidents of fraud, waste, and abuse by an entity receiving Federal funds that have led or may lead to improper payments by the Federal government.  The link for reporting fraud, waste and abuse is located at the top of the paymentaccuracy.gov home page.

Do all Improper Payments represent a loss to the government?

No.  Another prevalent misunderstanding is that all improper payments are a loss to the government, but that is not always the case. 

Also, many of the overpayments are payments that may have been proper, but were labeled improper due to a lack of documentation confirming payment accuracy.  We believe that if agencies had this documentation, it would show that many of these overpayments were actually proper and the amount of improper payments actually lost by the government would be even lower than the estimated net loss discussed above.

How does a Federal agency measure its Improper Payments?

For all Federal programs identified as susceptible to risk, the responsible Federal agencies obtain a statistically valid estimate of the annual amount of improper payments in those programs. OMB Guidance (Circular A-123 Appendix C) PDF Document describes acceptable statistical sampling methodology in Part I.A.9, Step 2 and in Part I.A.14.

What are Federal agencies doing to prevent and recover Improper Payments?

The key to reducing instances of improper payments is to 1) implement effective financial management controls and 2) regularly assess their effectiveness, refining them as necessary. 

Two key pieces of legislation that support this effort are the Improper Payments Elimination and Recovery Act of 2010 (P.L. 111-204)   and the Improper Payments Elimination and Recovery Improvement Act of 2102 (IPERIA) (P.L. 112-248) .  These laws require agencies to have a cost-effective program of internal control to prevent, detect, and recover overpayments by implementing policies and directing activities that review and verify payments before they go out the door.

While recovering improper payment contract dollars is relatively straightforward with a buyer-seller relationship, this is not true for all types of payments.  Federal payments are often made through “one-way” arrangements such as grants, benefits, and loans.  In these instances, the comparably low recovery rate inherent to the payment type makes the use of payment recovery audits fail the cost-effectiveness test.  Pre-payment efforts to increase data verification and validation would be more effective for these payments.  Research has shown that payment recovery audits are primarily effective for contract payments, and agencies generally do not identify a cost-effective method of further deploying them.

Do Programs Administered by the States Make Improper Payments?

Yes. In general, state-administered programs are partially or fully funded by the Federal government, but each state sets its own guidelines regarding eligibility and services. Just like Federally-administered programs, state-administered programs also make improper payments. For example, state-administered programs are responsible for about a third of the billions of dollars in improper payments made by high-priority programs.

What is the purpose of this website?

As required by Executive Order 13520 dated November 20, 2009, Reducing Improper Payments, the U.S. Department of the Treasury, in coordination with the U.S. Department of Justice and the Office of Management and Budget, established this website to create a centralized location to publish information about improper payments made to individuals, organizations, and contractors.  This website also provides a centralized place where the public can report suspected incidents of fraud, waste, and abuse.  The link for reporting fraud, waste and abuse is located at the top of the paymentaccuracy.gov home page.

What information is included in this website?

This website includes current and historical information about improper payments made under Federal programs that have been determined to be susceptible to significant improper payments based on assessments of all government programs.  As required by Executive Order 13520, agencies with high-priority programs provide the following information for the website:

  • The name(s) of the accountable official(s) responsible for meeting the targets for reducing and recovering improper payments, as established by his or her Federal agency or program;
  • Rates and amounts of improper payments, including causes of improper payments;
  • Targets for reducing improper payments.

Some of the data for these requirements are not immediately available, but are anticipated for publication in the future.

What is the source of the information contained on the website?

The Improper Payments Elimination and Recovery Act of 2010 PDF Document and Appendix C to Circular No. A-123, Requirements for Effective Estimation and Remediation of Improper Payments PDF Document require Federal agencies to report information related to improper payments.  The information included on this website has been reported by agencies to the Office of Management and Budget.

What is a fiscal year? What is a fiscal reporting year?

The Federal government uses a defined 12-month period for its own accounting purposes which is known as a financial or fiscal year (FY).  The Federal fiscal year begins on October 1 and ends on September 30 of the following calendar year.  While most of the data reported on this site is measured and reported by fiscal year, a few programs may collect data by calendar year or other year-long period, depending on the program’s requirements or data availability.  In these cases, we have used the term fiscal reporting year to best describe the time period in which the most current information was reported.  For more detail by program, refer to the annual Performance and Accountability Reports or Agency Financial Report /Annual Performance Report, which are available on the agency’s website or the CFO Council’s site.  There is also a link to these reports on this site on our Resources page under Agency Financial Reports.

Can I download data?

Improper payments data can be downloaded from this site.  Please see our Resources page under Data and Payment Accuracy Dataset.

I can’t find a specific program or agency? Is their data available?

Agencies with programs susceptible to significant improper payments are required to report information about improper payments. Each agency reports improper payments in their annual Performance and Accountability Report or Agency Financial Report which may be found on the Resources page under section under Links to Agency Financial Reports.

Why is a Federal program deemed susceptible to significant Improper Payments?

Generally, a program is deemed susceptible to significant improper payments if the program has improper payments greater than $10 million and over 1.5 percent of all payments made under that program, or if the program has more than $100 million in estimated improper payments. The criteria for determining when a program is susceptible to significant improper payments are found in the OMB Guidance (Circular A-123 Appendix C) PDF Document.

Are programs that are identified as susceptible to significant improper payments, and that annually report improper payment estimates, permanently subject to improper payments reporting requirements?

No. If an agency’s program is currently estimating and reporting improper payments, but has documented a minimum of two consecutive years of improper payments that are below the statutory thresholds described in OMB Guidance (Circular A-123 Appendix C) PDF Document (Part I, A, 9) the agency may request relief from the annual reporting requirements for this program or activity. This request must be submitted in writing to OMB, and must include an assertion from the agency’s Office of Inspector General that it concurs with the agency’s request for relief. The request for approval must be submitted to OMB no later than June 30 in the fiscal year for which the agency is requesting to halt reporting (e.g., a request to halt reporting for a program beginning with the FY 2017 reporting cycle must be submitted by June 30, 2017).

OMB will review the request and take into account the following criteria:

Burden—does measuring and reporting improper payments lead to a heavy burden (e.g., in terms of funding, program staff hours, etc.)?

Legislative considerations—are there any legislative requirements or recent changes that affect the program’s ability or inability to estimate and report improper payments?

Audit findings—are there any audit findings (i.e., by the Inspector General or GAO) that point to reasons why the program might want to continue measuring and reporting improper payments?

Ongoing risk mitigation strategies—are there any appropriate controls, policies, or corrective actions that have been put in place to mitigate the risk of fraud and error in the program?

Other considerations—are there any other key factors that should be considered in deciding whether or not to grant relief from measuring and reporting improper payments?

What agencies/programs have been granted relief from reporting?

The following programs have met the above listed criteria and have been granted relief from reporting beginning with FY 2016 reporting:

Department of Transportation – Federal Aviation Administration Airport Improvement Program

Department of Education – Title 1

General Services Administration – Building Operations – Utilities

What is an Accountable Official?

Executive Order 13520 requires agencies operating high-priority programs to designate an official who holds an existing Senate-confirmed position to be accountable for meeting targets for reducing improper payments associated with each high- priority program, and for overseeing implementation of program integrity efforts. OMB Guidance (Circular A-123 Appendix C) PDF Document provides additional information about who may serve as an accountable official and the accountable official’s roles and responsibilities.

What is an Improper Payment rate?

The improper payment rates of programs susceptible to significant improper payments are reported on this website by agency and by fiscal year. The rate is calculated by dividing the improper payment dollars by the total outlays made by a program during the measurement year.

What is an Improper Payment target?

Programs susceptible to improper payments develop annual reduction goals for the program’s payment error rates. In addition, Executive Order 13520 requires agencies operating high- priority programs to establish semi-annual (or more frequent) measurements as well as performance/reduction targets for reducing improper payments. OMB Guidance (Circular A-123 Appendix C) PDF Document provides additional information about agency requirements for establishing supplemental measurements and targets related to improper payments.

What are outlays?

Outlays occur when the government pays its obligations, whether with cash, check or electronic funds transfer. The Office of Management and Budget’s Circular A-11 describes “outlay” as a payment to liquidate an obligation, other than the repayment of debt principal. Outlays generally are equal to cash disbursements but also are recorded for cash-equivalent transactions, such as Federal employee salaries and debt instruments. Outlays are the measure of Government spending.

What is “program access” and how is it measured?

The purpose of Executive Order 13520 is to reduce improper payments while continuing to ensure that Federal programs serve their intended beneficiaries. Government efforts to reduce improper payments should not deter eligible beneficiaries from seeking and receiving benefits. “Access measures” are developed by programs to assess items like the rate of participation by eligible beneficiaries, rate of benefits claimed by eligible beneficiaries, availability of program providers, whether eligible individuals are being improperly prevented from accessing program benefits, the ease or difficulty of accessing benefits, or whether eligible beneficiaries who are receiving benefits as a result of agency efforts to reduce errors. Additional information can be found in the OMB Guidance (Circular A-123 Appendix C) PDF Document.

What are supplemental measures and why were they created?

Under the Executive Order 13520 Reducing Improper Payments and OMB Guidance (Circular A-123 Appendix C) PDF Document, agencies with high-priority programs are required to establish measurements for reducing improper payments. The supplemental measures are intended to provide information on high-risk areas and report on root causes of errors that agencies can resolve through corrective actions.

How often are supplemental measures updated?

Supplemental measures are developed to tackle the specific challenges of each program and therefore vary in the frequency that the data are collected and reviewed. Most supplemental measures will be reported either quarterly or semiannually. Refer to the high-priority program pages for specifics on each measure.

How is PaymentAccuracy.gov different from USASpending.gov?

While USASpending.gov show the public where their money is being spent – by programs or activities – PaymentAccuracy.gov reports how efficiently and effectively Federal payments are being made by agencies and state partners.  In other words, is the government paying the right person, at the right time, for the right amount?

What is a payment recapture audit (also known as a recovery audit)?

A payment recapture audit is a review and analysis of the agency’s books, supporting documents, and other available information supporting its payments. This review is specifically designed to identify overpayments to contractors that are due to payment errors. It is not an audit in the traditional sense.  Rather, it is a control activity designed to assure the integrity of contract payments, and, as such, is a management function and responsibility.

What can the American public do to help?

Taxpayers are able to report suspected incidents of fraud, waste, and abuse that can lead to finding and recovering improper payments, and implementing corrective actions to prevent future improper payments.  The link for reporting fraud, waste and abuse is located at the top of every paymentaccuracy.gov page. 

Federal agencies are committed to providing high-quality improper payments data to the public.  With your help we can do better.  Please contact us at (202) 395-3993 to notify us of potential issues with the website — including data, website and document links, or other information.