$120B is the amount that we KNOW the federal government lost through making improper payments in 2010. alone. That’s $1.2T over a decade! That’s what we KNOW was overpaid – the reality is probably much higher.
Just a week after Congress and the President nearly shut down the government over a mere $38B in 2011 budget cuts – Controller of the Office of Management and Budget, Daniel Werfel, testified before Congress admitted that “One of the biggest sources of waste and inefficiencies within the Federal Government is the amount we pay out each year in improper payments”.
Think this is a new problem? Think, again. At the same hearing, Kay L. Daly, representing the government watch dog General Accounting Office (GAO), testified that since fiscal 2000, the GAO has issued a “number of reports and testimonies” — “highlighting long-standing, widespread, and significant problems with improper payments across the federal government”.
In 2002 Congress passed the Improper Payments Information Act to require agencies of the government to annually review programs over $10M, assess risk of overpayment, and develop corrective actions – under GAO and OMB supervision. In 2010 the law was amended to expand requirements on agencies to attempt to recover improper payments. The recovery goal for 2012 is —– a whooping $2B – perhaps .0003 of the total!
Under IPIA, as its called, every year more and more government programs are found to have activities that are “risk-susceptible”. As a result, total improper expenditures reported have tripled from $45B in 2004 to $125B in 2010.
The prepared testimony and other GAO reports that I reviewed yesterday do point to some limited successes in reducing wasted dollars. Notably, at the Department of Agriculture, improper payments under the Marketing Assistance Loan Program, fell from $85M in 2009 to only $35M in 2010. New payment control procedures were implemented, Most importantly employee’s individual performance reviews and results were directly linked to resolving this problem. This is an example of “situational best practice” that should and can be duplicated across the federal work force!
Following GAO recommendations, the Department of Defense has adopted both “prevent controls” that are common to private industry – such as three way matching of invoices to material receipts and original contracts – as well as audit controls to reduce their rate of error as a percentage of the budget. DOD, as a matter of fact, is not one of the the Top 10 Programs subject to over payment in 2010.
The top 10 offenders are repeat offenders whose error rates remain stubbornly high over 7 years. Together, according to GAO testimony, they drive 94% of known overpayments. Leading the list of programs – drum roll, please – Medicare, Medicare Advantage and Medicaid – totally $70.4B. No audit results were even reported for Medicare Part D – dum-de-dum! $17.5B was overpaid in unemployment benefits and $16.9B in Earned Income Tax Credits.
More alarming or frustrating? Probably the latter?
Also, in 2002; Congress passed the Sarbanes Oxley Act that mandated all private corporations in the United States must put into place financial “prevent controls” prior to 2005. Piloted in 2004, (and implemented in 2005) CEOs and CFOs had to sign under penalty of arrest, trial and imprisonment a statement attesting to the accuracy of their financial results.
There is simply no justification that explains why after 7 years the federal government still cannot implement these same controls they mandated of private industry in just 2 years. Further, it calls into question whether the shareholders, that’s you and me, should expand the responsibility of the chronic and worst offender (Health and Human Services) until they can demonstrate that they are able to carry out their existing mandates?
A private sector CEO knows that scrubbing the internal business processes of ever dime of excess expense before raising prices is vital – lest the company become non-competitive. Higher taxes, like higher prices, reduce global competitiveness.
It may, in fact, be necessary to raise taxes on some or all American taxpayers. But it is immoral to do so in the face of such widespread and inexcusable abuse of the taxpayers’ trust. Reducing waste of taxpayer dollars to 0 must be one of the 10 year goals and automatic triggers for a Deficit Reduction deal!
[...] Fundamental to any Medicare “fix” is to stop the $70B fraud problem the General Accounting Office(GAO) reported to Congress this year – an increase of $20B over the previous year. The fraud number has increased every year since the GAO was tasked with reporting fraudulent spending almost a decade ago. (http://reimagineamerica.org/2011/found-1-2t-of-4t-in-targeted-deficit-reduction/) [...]