OMB to hold senior officials more accountable for government waste

The Obama administration is upping the ante in the way it holds agency officials accountable for how their agencies run.

In their latest move, the President will issue an executive order in the next week requiring secretaries to name a Senate confirmed official to be personally responsible for reducing the amount of improper payments.

Office of Management and Budget director Peter Orszag says this person will be featured on a new online dashboard tracking agency improper payments.

"The dashboard will track the error rate, identify the responsible official and list the top payment errors at given point in time," says Orszag during a conference call with reporters Tuesday. "The dashboard will give insight into what is happening and make it easier for the public to monitor how agencies are doing. We also will ask for simpler and easier Web sites and e-mails to report potential improper payments."

The dashboard will be similar to what OMB did for chief information officers and technology projects, and what it plans to do around cybersecurity.

Orszag says the accountability will not stop there. The senior official must set reduction targets that will be approved and reviewed by the agency's inspector general.

"If agencies do not succeed in reducing their improper payments two years in a row, the cabinet official and responsible official will have to meet with the OMB director and lay out a specific plan on how they will succeed in reducing improper payments," Orszag says.

Daniel Werfel, the OMB controller, says the person responsible will not automatically be the agency chief financial officer. While most CFOs are Senate confirmed, Werfel says it will be the person who can impact the program best.

"We will work with the agencies to find the right accountable official because we want the person who is best positioned to be accountable for the errors and that may be an assistant secretary or deputy commissioner," Werfel says. "One of the lessons learned is there needs to be a partnership between finance, audit and program experts to drive results. We anticipate that in many cases it will not be the CFO."

The executive order comes on the heels of a $26 billion increase in improper payments in 2009.

Orszag says agencies handed out more than $98 billion that they shouldn't have in last year.

He says there are two reasons for the increase. The first is because the government spent more money in 2009 with the Recovery Act and other economic programs.

Additionally, OMB changed the methodology for how they come up with the error rate. Orszag uses the Medicare program as an example of how the approach changed.

"In the traditional fee-for-service, the error rate went up from 3.6 percent in 2008 to 7.8 percent in 2009 and that is a reflection of stricture measurements of improper payments," he says. "As one example, a simple thing such as an improper signature from doctor is more likely to trigger classification as an improper payment than it was last year. And similarly now if an auditor goes back and finds a wheel chair provided to a recipient and the auditor cannot obtain verification from the doctor as opposed to the supplier that is classified as an improper payment and that was not always the case."

He adds that the Department of Health and Human Services IG recommended the methodological changes and the HHS management agreed to them.

The executive order also will provide for new incentives to states, which run many of these programs, and federal contractors.

Orszag says currently if the government pays a contractor twice or too much money, there are no penalties for the contractor not reporting the overpayment. They just have to pay the money back-unlike taxes were citizens would have fines and interest on top of the paying back the overpayment.

"The notion here is a contractor should know they received payment in error and they have a responsibility to return the money back to the government," Werfel says. "In cases where they do not do that, the executive order kicks in and makes more aggressive requirements for contractors to pay back and if they fail to do that there will be additional penalties."

OMB also will expand the use of recovery audits at the state level to all 50 states. OMB sponsored a three-year pilot program with three states and saw a return of almost a billion dollars.

The White House's plans drew praise from Capitol Hill.

Sen. Tom Carper (D-Del.) and Rep. Patrick Murphy (D-Pa.) applauded the executive order, but were unhappy that the amount of improper payments increased.

""As chairman of the subcommittee on Federal Financial Management, I have held hearings which revealed that agencies were underestimating the amount of money they waste. And, unfortunately, these numbers may still be just the tip of the iceberg since they don't even include estimates for several major programs, including the Medicare prescription drug plan," Carper says in a release. "Further, this news shows that we have a lot to do here in the federal government when it comes professionalizing financial management and rooting out waste. It goes without saying that these results would be completely unacceptable in the private sector, as they should be in government, especially at a time of record deficits."

Carper and Murphy introduced companion legislation, called the Improper Payments Elimination and Recovery Act of 2009, to address many of these issues.

Murphy says the bill would "bring additional accountability and transparency by holding agencies accountable for failing to reduce improper payments and will expand the use of recovery auditing to recoup hundreds of millions of dollars for hardworking taxpayers."

Among the reported waste (from an Associated Press report):

• Agriculture: $4.3 billion in improper payments, or 5.9 percent of total department spending. Much of it was in the food stamp, federal crop insurance and school meals programs.
• Defense: $849 million, or 0.5 percent.
• Education: $599 million, or 2.1 percent.
• Health and Human Services: $55.1 billion, or 9.4 percent. That included improper payment rates of 7.8 percent and 15.4 percent in the Medicare fee for service and Advantage programs, respectively.
• Homeland Security: $644.5 million, or 3.7 percent. Much of it was in the Homeland Security grant program as well as Disaster Relief Fund Vendor Payments.
• Housing and Urban Development: $1 billion, or 3.5 percent. All of it was attributed to public housing and rental assistance.
• Labor: $12.3 billion, or 9.9 percent. Almost all of the improper payments were in the unemployment insurance program.
• Treasury: $12.3 billion, or 25.5 percent. All of it was attributed to improper payments in the earned income tax credit.
• Transportation: $1.5 billion, or 3 percent. Much of it was in the Federal Highway Administration planning and construction program.
• Veterans Affairs: $1.2 billion, or 2.7 percent. That included improper payments in the pension and other compensation programs.
• Social Security Administration: $8.0 billion, or 1.2 percent.

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On the Web:

FederalNewsRadio - Govt report: Over $98B wasted in improper payments

FederalNewsRadio - OMB controller nominee Werfel would take deeper look at DoD's books

FederalNewsRadio - CTO Chopra: how to fix VA's backlog

OMB - Improper Payments Web site

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