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Government agencies blew $125 billion on improper payments

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As Congress and the White House wrestle with spending cuts, one stubborn problem running up the deficit is improper government payments—$125.4 billion in 2010.

Presidential memos and a new law have drawn attention to improper payments, with some success, but agencies have a long way to go before reaching President Obama’s goal of reducing them to $50 billion by 2012.

Obama issued two memos last year to increase efforts to recover overpayments and created a Do Not Pay list to prevent improper payments. In July 2010, the Improper Payments Elimination and Recovery Act was enacted, which amended a similar law and increased requirements for federal agencies to identify, report and recover improper payments.

An analysis by the Government Accountability Office found that the majority of the improper payments were concentrated in 10 federal programs which held 94 percent of the total estimated improper payments in 2010, about $118 billion. The big spenders in improper payments came from four major programs: Medicare, Medicaid, unemployment insurance and the Earned Income Tax Credit (EITC) program.

Of the 28 programs that reported payment error rates, 17 agency programs have reduced improper payment rates compared with their initial or baseline error rates from 2004. Health and Human Services reported that the Head Start program’s estimated improper payments decreased from $213 million in 2009 to $123 million in 2010. The U.S. Department of Agriculture saw a decrease in the estimated improper payment amount for the Marketing Assistance Loan program by $55 million since 2009

Improper payment estimates include overpayments, underpayments and payments recorded incorrectly. They do not always indicate fraud in a federal program, but can signal other problems. Federal agencies listed insufficient documentation, incorrect calculations, program requirements changes and fraud as potential causes of improper payments.

The GAO acknowledged recent progress on improper payments, but said it too early to tell if the new law and presidential initiatives would erase the problem.

 “Congressional efforts to oversee agencies will be essential to ensure that agencies are taking the appropriate action to fully implement these administrative and legislative requirements to improve accountability, achieve targeted goals, and reduce overall improper payments,” the GAO said in its report.

FAST FACT:The Department of Transportation and U.S Postal Service failed to report risk assessments of their programs while HHS has not yet reported an improper payment estimate for Medicare Part D, the prescription drug program with about $59 billion in disbursements for 2010.