Obama ready to sign improper payments legislation

New law to require federal agencies to conduct more audits

President Barack Obama is ready to sign the Improper Payments Elimination and Recovery Act into law today to help reduce erroneous, fraudulent and duplicative federal payments.

The White House has said about $110 billion a year in taxpayer funds are wasted on wrongful payments made either to the wrong people for incorrect amounts, for incorrect purposes or without proper documentation, including payments to dead people, debarred contractors and felons. The president has set a goal of reducing such wasteful payments by $50 billion by 2012.

Under the legislation, agencies would have to must conduct annual risk assessments, and if a specific program is found to be susceptible to improper payments, the extent of the problem must be measured.


Related stories:

No Pulse, No Pay: How the Do Not Pay list will work
OMB's Paymentaccuracy.gov tracks improper payments by agencies


The new law would require more programs to conduct payment recovery audits. Under previous law, those reviews would be conducted if cost effective for contracting programs over $500 million. Under the new law, the recapture audits would have to be done for contractor payments, grants, benefits and loans of more than $1 million, if it is cost effective.

The new law would authorizes agency heads to use recovered funds for additional uses than currently allowed, including being reapplied for their original intent, or being used to improve their financial management or to support inspectors general.

Federal agencies that do not comply with the new law would face penalties.

One of the keys to the improper payments bill is new software that is being used to scan through programs and locate potential improper payments. Peter Orszag, budget director for the Office of Management and Budget, introduced the new tools in a press conference on June 18.

White House officials said the legislation supplements ongoing efforts to eliminate wasteful spending. In November 2009, the president issued an executive order laying out a strategy to reduce improper payments.

In March 2010, Obama issued an order directing federal agency to intensify use of payment recapture audits, and on June 18 White House officials announced a federal Do Not Pay List set of linked databases so that agencies can more easily check on the eligibility status of an individual or contractor.

The White House has set up a new Web site, PaymentAccuracy.gov, to track agency efforts to identify and reduce improper payments.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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