President Obama to Sign Improper Payments Elimination and Recovery Act

Bill aims to help achieve goal of reducing wasteful payments by $50 billion by 2012

WASHINGTON – Today, President Obama will sign the Improper Payments Elimination and Recovery Act (IPERA) which will help achieve the President’s new goal of reducing wasteful, improper payments by $50 billion between now and 2012.

President Obama said, “The bipartisan bill I’m signing today will help ensure that our government serves as a responsible steward for the tax dollars of the American people, and builds on the efforts we’re taking to cut wasteful spending.  Those include my proposal for a three-year freeze on all non-security discretionary spending in my budget and working to put an end to wasteful government contracting and unnecessary no-bid contracts.  The bill I’m signing today passed unanimously in both the House and the Senate – a powerful reminder of what we can accomplish when we put partisanship aside and do what’s best for the people we serve.”

Each year, the federal government wastes billions of American taxpayers’ dollars on improper payments to individuals, organizations, and contractors. These are payments made in the wrong amount, to the wrong person, or for the wrong reason. Since taking office, the President has worked to eliminate wasteful spending in part by reducing improper payments.  In November 2009, the President issued an executive order laying out a strategy to reduce improper payments through boosting transparency, holding agencies accountable, and creating strong incentives for compliance. He followed that up in March 2010 by directing all federal departments to intensify and expand payment recapture audits, and in June by ordering the establishment of a federal Do Not Pay List so that there is one source for agencies to check on the eligibility status of an individual or contractor.

A full fact sheet on the IPERA is below, and a full background document is attached.

FACT SHEET:

July 22, 2010

Today, the President will sign into law the Improper Payment Elimination and Recovery Act (IPERA), an important step toward realizing the President’s new goal of reducing wasteful, improper payments by $50 billion between now and 2012.

In 2009, improper payments totaled nearly $110 billion, the highest amount to date. These include payments made in error or because of fraudulent claims by contractors and organizations as well as benefits sent to individuals who are dead or in jail. In fact, over the past three years, federal auditors have reported that the government paid out benefits totaling more than $180 million to approximately 20,000 Americans who were dead; and more than $230 million in benefits to approximately 14,000 fugitive felons or those in jail and who are not eligible for benefits.

Since taking office, the Administration has moved aggressively to reduce improper payments:

• On November 19, 2009, the President issued an executive order laying out a strategy to reduce improper payments through boosting transparency, holding agencies accountable, and creating strong incentives for compliance. Specifically, the executive order required the identification of high-priority programs, the selection of accountable officials to coordinate agency program integrity efforts, the development of supplemental measures of payment error for high-priority programs, a public website to track progress in reducing improper payments (PaymentAccuracy.gov), and the pursuit of tough penalties on contractors for failing to timely disclose credible evidence of significant overpayments received on government contracts.
• On March 10, 2010, the President signed a presidential memorandum directing all federal departments and agencies to expand and intensify their use of payment recapture audits. These are audits which offer specialized private auditors financial incentives to root out improper payments, and have been demonstrated through pilot programs to be highly effective. It is anticipated that using the payment recapture audits will return at least $2 billion over the next three years to American taxpayers, and more than that with new authorities to use these audits made available in the Improper Payment Elimination and Recovery Act.
• On June 8, 2010, the President announced that the Administration would cut the improper payment rate in the Medicare Fee for Service program in half by 2012. Doing so will eliminate more than $20 billion in payment errors by FY 2012.
• On June 18, 2010, the President issued a memorandum directing that a Do Not Pay List be established, a single source through which all agencies can check the status of a potential contractor or individual. Too often, an agency does not check all the different databases the government has or finds it difficult to do so. This denies agencies essential information they need to determine, for example, if an individual is alive or dead or if a contractor had been debarred. The Do Not Pay List will allow federal agencies to access this information in a more timely and cost effective manner and will help reduce improper payments made by the Government and help save taxpayer dollars.
• Also on June 18, the Vice President announced the expansion of a cutting-edge fraud mapping tool that the Recovery Accountability Transparency Board (RATB) has deployed that gathers enormous quantities of information in real time and then analyzes the data and helps connect the dots to identify indicators of possible fraud or error. The Administration is expanding the use of this type of tool across government, and piloting it first at the Centers for Medicare & Medicaid Services (CMS).

The IPERA will complement and help implement the Administration’s campaign against improper payments. Specifically, the bill will improve agency efforts to reduce and recover improper payments in several ways, including:

• Identification and Estimation of Improper Payments. IPERA requires agencies to conduct annual risk assessments, and if a program is found to be susceptible to significant improper payments, then agencies must measure improper payments in that program.  Further, over time, IPERA lowers the threshold for determining a program is susceptible to improper payments.
• Payment Recapture Audits. The bill expands the types of programs that are required to conduct payment recovery audits (from contracts to all types of programs and activities, including grants, benefits, loans, and contract payments), and lowers the threshold for programs and activities that must conduct these reviews if cost-effective (from $500 million to $1 million in annual outlays).
• Use of Recovered Improper Payments. IPERA also authorizes agency heads to use recovered funds for additional uses than currently allowed, including to improve their financial management, to support the agency’s Office of Inspector General, and for the original intent of the funding.
• Compliance and Non-Compliance Requirements. Currently, if an agency does not reduce improper payments or implement the existing law, there are no repercussions.  Under IPERA, there is a list of actions that an agency must take to be in compliance with the law, and the agency Inspector General is responsible for determining whether the agency is in compliance with the law. If the agency is found not to be in compliance with the law, then IPERA contains a series of actions that the agency must take to improve its error reduction efforts.