Feds Made $125 Billion in 'Improper Payments' in 2010--Enough To Fund State Department 11 Times Over

By Matt Cover | April 22, 2011 | 5:19 AM EDT

New $20 currency notes roll off the presses at the Bureau of Engraving and Printing in Washington. (AP File Photo/J. Scott Applewhite)

(CNSNews.com) - At a time of growing concern about government spending, the federal government made $125 billion in “improper payments” in fiscal 2010, more than eleven times the total 2010 spending by the U.S State Department.

The $125 billion in improper payments was also more than 7 times the total spending by the Justice Department or by NASA, which runs the U.S. space program, which is preparing to launch its last-ever shuttle flights.

Federal agencies reported improper payments estimated at $125.4 billion in fiscal year 2010, an increase of $16.2 billion from the $109.2 billion estimate in fiscal 2009, the Government Accountability Office said. Ninety-four percent of those payments came from social spending programs, including Medicare and Medicaid, GAO said in its April 15 report.

According to the U.S.  Treasury, total State Department spending was $11.017 billion in fiscal 2010--or less than 1/11th the amount the government made in improper spending. The Justice Department spent $16.6 billion during the year, and NASA spent $17.2 billion.

The GAO defines improper payments as “overpayments, underpayments, and payments that were not adequately documented,” as well as fraud. It also noted that improper payments are not necessarily fraudulent, only that they represent instances where the government did not follow its own internal rules for spending taxpayers’ money.

The $125 billion in improper payments came from 70 different programs across 20 federal agencies. “This estimate represents about 5.5 percent of the $2.3 trillion of reported outlays for the related programs in fiscal year 2010,” GAO said.

Ten programs accounted for 94 percent of all improper payments in 2010, led by Medicare, which reported $34.3 billion in improper payments – mainly because of medically unnecessary services and insufficient documentation.

Viewed a different way, the estimated $34.3 billion in improper payments attributed to Medicare in fiscal 2010 nearly equals the $38.5 billion in budget cuts made by Republicans in 2011, the largest spending cut in history.

Other programs making the “top ten” list are as follows:

2. Medicaid (Health and Human Services)

22.5 billion

Primary causes: Insufficient or no documentation provided for conducting medical reviews and cases that were either ineligible or their eligibility status could not be determined

3. Unemployment Insurance (Labor Dept.)

17.5 billion

Primary causes: Eligibility errors, errors in handling separation issues, and claimants who have returned to work and continue to claim benefits

4. Earned Income Tax Credit (Treasury Dept.)

16.9 billion

Primary causes: High turnover of eligible claimants, confusion among eligible claimants, complexity of the law, structure of the program, unscrupulous return preparers, and fraud

5. Medicare Advantage (Health and Human Services)

$13.6 billion

Primary causes: Insufficient supporting documentation, and errors in the transfer of data and payment calculations

6. Supplemental Security Income (Social Security Administration)

$4.8 billion

Primary causes: Incorrect computations, misapplication of an income or resource exclusion, and inadequate verification of accounts and wages

7. Old Age Survivors’ and Disability Insurance (Social Security Administration)

$3.2 billion

Primary causes: Computation errors; nonverification of earnings, income, or work status; and incorrect processing of applications or payments

8. Supplemental Nutrition Assistance (Agriculture Dept.)

$2.2 billion

Primary causes: Incomplete or inaccurate reporting of income by participants and incorrect eligibility determination by caseworkers

9. National School Lunch (Agriculture Dept.)

$1.5 billion

Primary causes: Verification and authentication errors, including inadequate documentation and fraud or misrepresentation by participants

10. Pell Grants (Education Dept.)


Primary causes: Verification errors

Kay Daly, the report’s author, told CNSNews.com that there is no breakout to explain what portions of the $125 billion total came from fraud or overpayments, etc.  But she did say that improper payments were typically due to overpayments and payments made to people who were ineligible for government assistance.

GAO explained that government agencies offer many different reasons for why they incorrectly sent 5.5 percent of their combined budgets out the door erroneously, including poor documentation, program changes, and even simple math errors.

“Agencies cited a number of causes for the estimated $125.4 billion in reported improper payments, including insufficient documentation, incorrect computations, changes in program requirements, and in some cases fraud.”

GAO also noted that the year-to-year change in improper payments was primarily due to an increase in improper payment estimates in the top four programs -- Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit

GAO said those four programs reported higher improper payments because they were spending more money – and the more money the government spends, the more spending errors it makes.

“Agencies reported that the increases in the estimates for these programs were primarily attributable to an increase in program outlays,” GAO said.