Eliminating Improper Payments

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Eliminating Improper Payments

• Presented byMatthew Faulkner Aaron Prose

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What is an Improper Payment?

• Means any payment that should not have been made
  or that was made in an incorrect amount under
  statutory, contractual, administrative, or other
  legally applicable requirement and
• Includes any payment to an ineligible recipient,
  any payment for an ineligible service, and any
  payment that does not account for credit for
  applicable discounts.

The Term Improper Payment
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What is Recovery Auditing?

• Duplicate Payments
• Errors on Invoices or Financing Requests
• Failures to Reduce Payments by Applicable Sales
  Discounts, Cash Discounts, Rebates or Other
  Allowances
• Payments for Items Not Received
• Mathematical or Other Errors in Determining
  Payment Amounts and Executing Payments and
• Failures to Obtain Credit for Returned
  Merchandise.

Recovery Auditing Identifies
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BackgroundLegislation and PMA Initiative

• Improper Payments Information Act
• Requires all programs perform an annual risk
  assessment for improper payments
• Programs determined to be at risk for improper
  payments are required to perform annual
  statistical samples and report results
• Section 831 of the Defense Authorization Act of
  2002 Requires a Cost Effective Recovery Audit
  Program
• Eliminating Improper Payments Initiative -
  Presidents Management Agenda.

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Eliminating Improper Payments InitiativeUSDA
IPIA Working Group

• OCFO Formed IPIA Working Group in 2003
• 290 Programs with
• Almost 100 Billion in Annual Outlays
• Meets Quarterly, or More as Needed
• IPIA Progress/Results Reported on a Monthly Basis
  Through the USDA Eliminating Improper Payments
  Scorecard

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Eliminating Improper Payments InitiativePMA
Scorecard Standards

• Yellow Standards
• Has a risk assessment in place that identifies
  all programs that are at significant risk of
  improper payments
• Has an OMB-approved plan for measuring improper
  payments on an annual basis and meets milestones
  established in the plan
• Agency has an OMB-approved corrective action plan
  that includes aggressive, yet feasible, reduction
  targets
• Agency complies with improper payments reporting
  requirements
• Green Standards
• Demonstrates that improper payments are being
  reduced consistent with reduction targets
• Has established improper payments recovery
  targets, where appropriate, and is actively
  meeting such targets

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Eliminating Improper Payments Initiative PMA FY
2005 Scorecard Results
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Eliminating Improper Payments InitiativeUSDA
Required Annual Actions

• Conduct Risk Assessments on All Programs for
  Improper Payments
• Conduct Statistical Sample on All High Risk
  Programs
• Establish Implement Cost Effective Recovery
  Audit Program for Fund Disbursements and Contract
  Compliance

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FY 2005 Management Challenge

• OIG Audited USDAs FY 2004 Improper Payments
  Activities
• Audit Identified Several Findings and
  Recommendations
• Added Improper Payments to the Department-wide
  List of Management Challenges

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Eliminating Improper Payments InitiativeFY 2005
Risk Assessment Changes

• OCFO Revised Risk Assessment Guidance and
  Templates
• FY 2004 templates listed general risks and
  internal controls
• FY 2005 templates are structured to require
  program specific vulnerabilities and internal
  controls
• Programs are divided into groups based on size.
  The larger the program the more in depth the risk
  assessment
• OCFO Increased Review of Draft Risk Assessments
• All risk assessments are reviewed by OCFO
• Larger risk assessments were performed in
  sections with OCFO review after each section
• Added a New Tests of Transactions Requirement

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Eliminating Improper Payments InitiativeRisk
Assessment Challenges

• FY 2005 Challenges
• Complete and review all risk assessments by
  4/30/05
• Perform Tests of Transactions for the first
  time
• FY 2006 Challenges
• Review programs that will need substantial risk
  assessment work
• Some programs will need full risk assessments
• Some programs will need specific improvements to
  sections
• Some programs will be left substantially
  unchanged from FY 2005
• Improve Tests of Transactions
• Improve how audits are addressed in risk
  assessments
• Address both program and financial risks
• Accelerate timeline

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Eliminating Improper Payments InitiativeAnnual
Statistical Sample

• FY 2005 Challenges
• Perform statistical samples on five programs
• Develop corrective action plans for nine programs
• Develop and meet improvement targets for FY 2005
• Develop improvement targets for FY 2006-2008
• Set targets to recover improper payments
• Achieve green status on Eliminating Improper
  Payments PMA
• FY 2006 Challenges
• Meet improvement targets
• Implement the corrective action plans
• Work towards completing a statistical sample on
  remaining four programs
• Move the statistical sample and reporting process
  into normal routines

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Eliminating Improper Payments InitiativeRecovery
Audit Challenges

• FY 2005 Challenges
• Forest Service and DA are implementing a pilot
  program with PRG Schultz to perform recovery
  auditing.
• Based on results that will be available in June
  2005, OCFO will determine whether to expand the
  program to the entire Department.
• Develop a departmental program
• FY 2006 Challenges
• Establish standardized, routine process for
  recovery auditing
• Maximize recoveries while minimizing costs

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Contact Information

• Matthew Faulkner
• Email matthew.faulkner_at_usda.gov
• Phone [phone]
• Aaron Prose
• Email aaron.prose_at_usda.gov
• Phone [phone]

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Questions?