Financial Management

Fight against improper payments shows results

fraud in digits

Data analytics techniques are proving their worth as they aid efforts to detect fraud, error and other sources of improper payments. (Stock image)

The use of big data and analytics helped the federal government reduce the governmentwide rate of improper payments last year, but officials and lawmakers think more can be done to stem the flow of the more than $100 billion wrongly paid annually.

Duplicate payments to vendors, disbursement of entitlement benefits to ineligible recipients, tax-refund fraud and other improper payments cost the government $108 billion in 2012, according to the Government Accountability Office, a rate of 4.35 percent. In 2011, improper payments totaled $116 billion and hit a high of $123 billion the year before.

Danny Werfel, controller at the Office of Management and Budget, touted the Obama administration's efforts to curb improper payments at a hearing of the Senate Homeland Security and Governmental Affairs Committee on May 8 and cited several program integrity proposals in President Barack Obama's fiscal 2014 budget request.

Werfel shared a few data analytics success stories. The Internal Revenue Service has stepped up its use of predictive filters to target potential perpetrators of identity theft among tax filers. Werfel said the IRS has so far rejected or suspended more than 2 million suspicious tax returns in the current filing season. He also noted that a targeted cross-check of Medicare and Social Security databases helped identify payments still going to recipients who have passed away.

The Labor Department is ramping up its use of predictive analytics to identify fraud in unemployment insurance collection, especially among those who have gone back to work but continue to receive benefits. Werfel cited one program that taps into direct-deposit data from banks to ferret out unemployment recipients who are working at payroll jobs. A command center at the Centers for Medicare and Medicaid Services brings together experts to build anti-fraud investigative tools. According to Werfel's testimony, $4.2 billion in improper health care payments were recovered in 2012 -- a record since the institution of a fraud-detection program in 1997.

"Despite some progress that has been made, error rates -- and the amount of money lost to avoidable errors -- still clearly remain at unacceptably high levels," said Sen. Tom Carper (D-Del.), the committee’s chairman. "And what disturbs me most about this problem is that we seem to be making these kinds of mistakes at a rate much higher than a business or the average family would tolerate or could afford."

In 2012, the government established the Do Not Pay program run by the Treasury Department as a way for government agencies to verify the eligibility of vendors and award recipients. Executive agencies have a deadline of June 1 to begin reviewing program payments using the DNP system. Currently, 36 federal agencies are verifying payments using DNP databases and analytics programs. The Obama administration is looking to improve the quality and scope of the data available to the DNP program by adding databases on new hires, prisoners, people who have defaulted on federal loans, and the complete Death Master File that is compiled by the Social Security Administration and includes data supplied by individual states.

The Death Master File is a bit of a political hot potato. It contains more accurate and up-to-date information than the database used by DNP, but privacy restrictions in the Social Security Act prevent it from being shared for purposes other than paying federally funded benefits. The administration is looking to update sharing rules to allow the Death Master File to be used for a variety of purposes, including public health, law enforcement, debt collection and other uses not permitted under current law.

There are other regulatory and legislative hurdles to operating the DNP system at maximum efficiency, said Treasury official Richard Gregg. The Improper Payments Elimination and Recovery Act of 2012 tweaked some of the rules regarding database sharing among agencies, and Treasury officials are seeking guidance from OMB on how the changes affect the DNP system.

Patrick O'Carroll, inspector general at SSA, is also seeking relief from the rules that restrict records sharing, or "computer matching," in legislative terms. Legal requirements for formal computer matching agreements can bog down record-sharing requests and impede IG efforts to "detect improper payments and identify weaknesses that make federal programs vulnerable to fraud," he said.

The committee's ranking member, Sen. Tom Coburn (R-Okla.), promised to look at the requests contained in the administration’s budget proposal and have his staff put them into legislative language. Legislation on overpayments has passed consistently on a bipartisan basis, and updates to the DNP system will presumably stand a better chance as stand-alone legislation or inserted in a package with brighter prospects of passage than the president's budget.

Reader comments

Sat, Jun 1, 2013 HURIDER

Sadly, this is all about checking "accounting" records - The real problem in Government spending is a lack of cost analysis - And I'm not talking analyzing the cost flow through an accounting system - I mean where one analyses the allocability of the accounted-for resources, such as type and quantities of labor, material, land, and other direct items Just because these costs are accurately recorded in an accounting system does not mean that they did not use too much of the wrong resources Which is typical in most proposals to the Government and Government prime contractors (budget or procurement) and actual practice. Internal estimating models used by the Government are almost entirely based on unsupported recorded accounting records. Realistic estimating by a "business analyst" is rare because they get ignored when they talk about the amount of resources that should be, versus what is recorded. Real resource analysis in Government budgeting and procurement used to exist; but got shoved aside because the Executives in the U.S. Government did not understand the difference between accounting and business analyst; and got rid of cost analyst and real estimators and replaced them with accounts.

Thu, May 9, 2013

You know it is sad when "Salary" employees are getting checked on by having to use a in/out board. If you come in early, work through lunch or leave late the office no big deal, but you walk in late or run late cause you did not get your food at the restaurant and they are screaming. Is ther not a law that prohibits the goverment from putting a time clock on salary employees, it is not like they are paying over time and comp time some of us hardly ever claim that or care to cause there is no time to take off. Can on of you lawyers bring that issue to light, not a law suit again but just mention to this goverment managers that a time clock is unlawful to salary employees.

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