U.S. Government Tackles Improper Payments — Maybe You Should, Too

improper payments Andrey Popov/Adobe Stock

Congress recently passed the Federal Improper Payments Coordination Act of 2015, which is aimed at preventing improper payments made by agencies either because of error or because of fraud. It is an issue worth tackling, considering the government estimated $125 billion in improper payments were made during fiscal year 2014.

Sen. Tom Carper, D-Delaware, was one of the authors of the bill, and said while government agencies have made efforts to stop this wasteful spending, the Improper Payments Coordination Act calls for better tools and “stronger program integrity measures” to identify and stop improper payments from happening.

Sen. Ron Johnson, R- Wisconsin, also an author of the bill, weighed in. “Taxpayers expect the federal government to ensure that it is paying the right people, in the right amount, for the right reason,” he said in a press release. “I’m pleased that my bill with Senator Carper to curb wasteful federal spending has passed the House and Senate and will be sent to President Obama.”

The bill also grants states, state agencies, contractors and subcontractors the option to access the Do Not Pay Initiative, a Treasury Department system of databases federal agencies use to verify vendors before paying them.

"It's good to see the federal government increasing its focus on improper payments,” said Pierre Mitchell, chief research officer at Spend Matters.

Spend compliance is a complex problem with complex root causes in both the private and public sector. Spend compliance is also an issue Spend Matters recently tackled in a multi-part Plus series. Pierre also pointed out the new Improper Payments Coordination Act looks to “clamp down” on issues that should be a no-brainer, but are clearly things organizations need help with.

“For example, when someone dies, the death certificate and death-related claims information should immediately be fed back to Social Security to prevent fraudulent payments to deceased people that are collected by others illegally,” Pierre said. “A ‘no pay list’ of forbidden payees is also critical when the payees no longer have commercial rights to funds due to non-performance, non-compliance and contracts simply expiring. This seems straightforward, but even private sector firms fall victim to these issues.

“Evergreen contracts auto renew. Recurring invoices can remain poorly inspected. Duplicate payments can still be all too common. ‘Dead suppliers’ supposedly being offboarded can sometimes hang around in the vendor master,” Pierre continued. “And all these conditions and others can be created by unscrupulous buyers, accounts payable staff and/or suppliers that are hard to catch.”

As part of the bill, Congress is asking the secretary of the treasury to submit a report detailing data analysis performed by the Do Not Pay Business Center “for the purpose of detecting, preventing, and recovering improper payments through pre-award, post-award prepayment and post-payment analysis,” the bill said. It also asks that the report include information on whether “the metrics used in determining whether the analytic and investigatory efforts have reduced, or contributed to the reduction of, improper payments or improper awards.”

Looking Ahead for 2016

Pierre called the new legislation a “practical set of recommendations” that private-sector organizations, not just public, could find helpful.

“Regardless of your political persuasion, good management of spending is something everyone can get behind, and the increasing intelligence of fraud detection analytics simply cannot come soon enough to any organization,” Pierre said. “This is why we think that risk and compliance analytics are going to be so big in 2016.”

First Voice

  1. Virgil DeArmond:

    Last year in 2014 “improvemnents” on my taxes were increased by $60k…. Unfortunately for me, there had been no improvements…I sent letters and asked for explanations, but there was no response. I even asked officials to come down ( same city) and visit the improvements, but there was no response. There were no noteable changes, in the home itself, property,or the yard itself. All of my responses were ignored,
    Overall, with the inclusion of the $60k “improvement” my overall taxes were equal to my US Air Force ( now retired) annual pay of approximately $87k.
    I never received a response from the IRS.

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