Sneak Preview: GAO Recommends that DOJ Reassess Improper Payment Risks
(The following was excerpted from a recent article in the Single Audit Information Service.) Despite objections from Department of Justice (DOJ) officials, the Government Accountability Office (GAO) held firm to its recent recommendation that DOJ revise its process for assessing the risk of significant improper payments in the Law Enforcement program to help ensure that the agency reliably determines whether the program is susceptible to erroneous payments.
The Law Enforcement program was one of several high-dollar programs that GAO evaluated for the report to determine their risk of significant improper payments. Others included the Department of Agriculture’s (USDA) Agriculture Risk Coverage and Price Loss Coverage programs; Department of Health and Human Services’ (HHS) Head Start program; and the Department of the Treasury’s Home Affordable Modification program.
Improper payments are a long-standing problem in the federal government, estimated at almost $141 billion for federal fiscal year (FY) 2017. With the growing federal emphasis on reducing improper payments, grant recipients should seek to implement effective internal controls to limit improper payments (§200.303) that can cause them to be deemed high-risk recipients or even to lose their federal funding.
The Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300), as amended, defines “significant” improper payments incurred by a federal agency as those that exceed either: (1) 1.5 percent of program outlays plus $10 million; or (2) $100 million (regardless of the improper payment rate). USDA, HHS, Treasury and DOJ had determined that the five programs GAO reviewed for the report should be evaluated as low risk for susceptibility to significant improper payments. However, HHS, Treasury and DOJ did not have sufficient documentation that provided a reasonable basis as to why their programs should be assessed as low risk. Conversely, GAO determined that USDA’s quantitative risk assessment of its program’s susceptibility to significant improper payments provided a reasonable basis for its low-risk determination.
IPIA and Office of Management and Budget guidance contain nine risk factors that agencies must consider when determining whether to assess a program as high risk or low risk of significant improper payments. These factors are: (1) whether the program or activity is new to the agency; (2) its complexity; (3) the volume of payments made annually; (4) whether payments or payment eligibility decisions are made outside of the agency; (5) recent major changes in funding, authorities, practices or procedures; (6) the level, experience and quality of training for personnel responsible for making eligibility determinations or certifying that payments are accurate; (7) significant deficiencies in the audit report of the agency or other relevant management findings that might hinder accurate payment certification; (8) inherent risks of improper payments due to the overall nature of agency programs or operations; and (9) results from prior improper payment work.
“Although HHS, Treasury and DOJ considered, among other factors, the nine risk factors, … they did not document or effectively demonstrate how these factors affected their programs’ susceptibility to significant improper payments,” GAO said. “These programs’ risk assessments did not contain sufficient documentation to determine how the agencies arrived at their risk determinations for each risk factor, or how the total scores for all risk factors led to low-risk determinations.”
(The full version of this story has now been made available to all for a limited time here.)
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