Feds Made $124.7B in Improper Payments in 2014; ‘Almost $1 Trillion’ Over 12 Years

By Terence P. Jeffrey | October 7, 2015 | 4:14pm EDT
(AP Photo/Matt Rourke)

(CNSNews.com) - The federal government made an estimated $124.7 billion in improper payments in fiscal 2014 and has made “almost $1 trillion” in improper payments over the past twelve years, U.S. Comptroller General Gene Dodaro, head of the Government Accountability Office, told the Senate Finance Committee last week.

“In fiscal year 2014, agencies reported improper payment estimates totaling $124.7 billion, a significant increase—almost $19 billion—from the prior year’s estimate of $105.8 billion,” Dodaro told the committee in written testimony.

“The almost $19 billion increase was primarily due to the Medicare, Medicaid, and Earned Income Tax Credit programs, which account for over 75 percent of the government-wide improper payment estimate,” he said.

Improper payments can result from errors made by government officials and from fraud.

“An improper payment is defined by statute as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements,” Dodaro explained in his written testimony. “Among other things, it includes payment to an ineligible recipient, payment for an ineligible good or service, and any duplicate payment.”

“Improper payments have consistently been a government-wide issue despite efforts to reduce them and identify root causes, including fraud,” he said.

(Screen capture of chart published in Comptroller General Gene L. Dodaro's written testimony in the Senate Finance Committee.)

In 2002, Congress enacted the Improper Payments Information Act, which required some federal agencies to begin reporting on their improper payments in fiscal 2003. Congress followed that legislation with the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012.

But the dollar amount of estimated improper payments has increased over the course of the 12 fiscal years it has been reported (2003 through 2014).

In fiscal 2003, the government estimated that it made $35.0 billion in improper payments. By fiscal 2008, that had more than doubled to $72.5 billion. And, by fiscal 2014, according to Dodaro’s testimony it had almost doubled again to $124.7 billion.

The $124.7 billion in estimated improper payments for fiscal 2014 is the largest yet reported in nominal terms. However, the $120.6 billion in estimated improper payments made in fiscal 2010, when adjusted for inflation to constant 2014 dollars ($130.93) using the BLS inflation calculator, exceeds the $124.7 billion estimate for fiscal 2014.

“Improper payments remain a significant and pervasive government-wide issue,” Dodaro said in his written testimony. “Since fiscal year 2003—when certain agencies began reporting improper payments as required by the Improper Payments Information Act of 2002 (IPIA)—cumulative improper payment estimates have totaled almost $1 trillion.”

This is despite the fact that not all federal programs are estimating and reporting their improper payments and some programs do not have reliable estimates of their improper payments.

“There are several programs, including TANF [Temporary Assistance for Needy Families], where estimates are not being made at all,” Dodaro told the committee, as he presented charts depicting the fiscal 2014 improper-payment estimates. “So this picture is not the complete picture of the full extent of potential improper payments across the federal government, as large as these numbers are.”

“There are a number of areas where better estimates are required,” he said. “The Department of Defense is one of those areas where we think there needs to be better estimates.”

Just three programs—Medicare, Medicaid and the Earned Income Tax Credit—accounted for three-quarters of the improper payments that were included in the estimates.

(Screen capture of chart published in Comptroller General Gene L. Dodaro's written testimony in the Senate Finance Committee.)

"Based on HHS's fiscal year 2014 agency financial report, federal spending in Medicare and Medicaid is expected to significanly increase--on average by 8.6 percent per year over the next 3 years," Dodaro told the commitee. "Consequently, it is critical that actions are taken to reduce improper payments in these programs."

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