WASHINGTON, April 23, 2014 - How many of your tax dollars are paying for essential programs and services? And how much money is being spent improperly?

Those are questions that lawmakers and administration officials have been trying to get their heads around for decades by enacting laws and requiring new tools and strategies to identify “improper payments.” These are defined as payments that are made to the wrong recipient, in the wrong amount (too high or too low), without adequate documentation, or in an improper manner.

In fiscal year 2013, federal agencies reported a government-wide improper payment rate of 3.53 percent, a gradual drop from the high-water mark of 5.42 percent in FY 2009. Still, improper payments totaled approximately $106 billion out of nearly $3.5 trillion spent in FY 2013, according to www.paymentaccuracy.gov, which tracks improper payments government-wide.

However, the process for identifying and eliminating improper payments is still a “work in progress” for many agencies, including USDA. In fact, the department’s Office of Inspector General (OIG) released a report last week, noting that, for the third consecutive year, USDA did not comply with the Improper Payments Information Act on the $159 billion the agency spends on more than 300 programs.

Keep in mind that “compliance” requires more than providing estimates of improper payments for all programs identified as high risk. In order to comply, an agency has to meet seven different requirements including submitting several reports, a program-specific risk assessment, and corrective action plans – among others.

The OIG found that of the 16 USDA high-risk programs, 11 did not comply with one or more of the seven requirements. “Specifically, USDA did not publish an improper payment gross estimate for three programs; publish improper payment rates of less than 10 percent for two programs and meet reduction targets for eight programs,” the OIG noted.

The report sheds light on how USDA often struggles to meet the various requirements – despite years of trying various methods. For example, the Food and Nutrition Service’s (FNS) Child and Adult Care Food Program (CACFP) reported only a partial estimate of improper payments because “FNS has not yet developed a reliable method to estimate improper payments for the meal claims component of CACFP’s high-risk Family Day Care Homes category.

Last year, FNS hired a contractor to assess the feasibility of using parent recall interviews to validate claims, but the results were still pending during OIG’s review this year. As a result, eight years have passed without CACFP developing a reliable way of estimating improper payments for meals served in family day care operations.

For the Risk Management Agency’s (RMA) Federal Crop Insurance Corporation (FCIC), sampling methods were approved in 2004, but after OIG expressed concerns, the Office of Management and Budget (OMB) rescinded its approval for the sampling method in the fall of 2013. RMA officials are working with OIG and OMB to develop an alternative method.

For two of the 16 high-risk programs, USDA reported improper payment estimates of greater than 10 percent, but it targets two nutrition programs you might not expect. The School Breakfast Program and the National School Lunch Program reported improper payment estimates of 25.26 and 15.69 percent, respectively. USDA says most of the payment errors in the over 100,000 school meal programs across the country are caused by one of the following: misreporting of income by households that apply; administrative errors by schools in processing applications; and errors by cashiers in counting reimbursable meals. Some of these problems may be rectified by provisions included in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA), which are intended to improve access to meals through “direct certification”, using data from programs such as the Supplemental Nutrition Assistance Program (SNAP) to identify eligible children.

In addition, USDA is conducting a nationwide study to evaluate the progress in reducing errors that result in improper payments. The data collected in School Year 2012-2013 will provide updated information on the level of improper payments in NSLP and SBP as well as help us understand how effective efforts to reduce erroneous payments have been, and what challenges remain, according to a USDA spokesperson.

In political circles, the Supplemental Nutrition Assistance Program (SNAP) is a frequent target of GOP criticism linked to waste, fraud and abuse. However, the SNAP was the most successful program in reducing its error rate, according to USDA, dropping down to 3.4 percent. But even with the improved performance, the program is still rated as one of OMB’s “high error” programs, with an estimated $2.6 billion in improper payments.

Another frequent target of criticism is the federal crop insurance program. The RMA uses a three-year running average to calculate its improper payment rate, randomly sampling 50 policies from one-third of the 18 approved crop insurance providers in 2009, 2010 and 2011 for the 2013 report. One company’s error rate was 27.3 percent in 2011, which – despite other improvements by RMA – “substantially increased FCIC’s 3-year running average” and resulted in upping the error rate to 5.2 percent in USDA’s fiscal 2013 reports. An internal agency team and contractor are now taking a comprehensive look at the methodology.

Even when agencies make improvements in identifying improper payments, it can hurt their score. The NRCS Farm Security and Rural Investment (FSRI) Act programs missed their target by 6.9 percent – the result, they reported of significant improvements in testing which enabled the agency to identify more improper payments than in recent years. “NRCS conducted training, issued bulletins, updated its policy and conducted a detailed review to ensure this does not happen again,” OIG reported.

USDA’s Chief Financial Officer agreed with most of the OIG recommendations and is now required to submit plans to become compliant to the required congressional committees – actions which it plans to complete by July 31, 2014.


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