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Improper Payments: $1 Trillion of Simple Mistakes

The federal government sometimes makes payments in the wrong amount, to the wrong people, or for the wrong reason. These blunders are called “improper payments,” and the federal government estimates that they have cost taxpayers around $1 trillion since agencies began reporting them in 2003. In 2015 alone, 4.39% of payments made by the federal government were improper, totaling about $137 billion. Current efforts to prevent and recover these payments are lacking, and the parties involved face major barriers in identifying, preventing, and recovering this lost revenue.

Simply put, improper payments are transfers of money or assets from the federal government to other parties that should not have been made or that were made in the wrong amount. An example of an improper payment that many can relate to is being double charged for groceries. While not representative of all types of improper payments, this is similar to what the federal government is dealing with, except the federal government is being overcharged for healthcare and tanks rather than a couple apples.

This issue has reached such serious levels because the federal government lacks systems capable of tracking and following up on the massive number of payments it makes every year. Instead, the Office of Management and Budget allows agencies to use statistics to estimate improper payments and then use audits to try to collect them. And while these estimates have the potential to solve this problem, some agencies are putting forth lackluster efforts in addressing this issue.

Unfortunately, the public is starting to tune this out. We hear about government waste, fraud, and abuse all the time. It has become too commonplace, and it no longer inspires a sense of urgency. Here at POGO, we have jokingly tossed around the idea of rebranding the issue to make it seem more significant (“naughty cash” is currently one of our favorites). Hopefully, we are not at the point where such a gimmick is needed. The staggering amount of money lost to improper payments should be enough to sell this issue. However, without large amounts of external pressure by taxpayers, this problem will most likely continue to be a low priority for our government.

To invigorate the public’s interest, POGO plans to release a series of reports illuminating the issue of improper payments. Our first report is now available. This report introduces the concept of improper payments, highlighting its significance, its causes, and some of the barriers preventing effective identification, prevention, and recovery. POGO’s future reports will cover topics such as the inspectors general’s role in combating improper payments, potential solutions to barriers currently preventing effective prevention, and case studies on current best practices.

By: Nicholas Pacifico
Associate General Counsel, POGO

Nick Pacifico Nicholas Pacifico is Associate General Counsel at the Project On Government Oversight.

Topics: Government Accountability, Open Government

Related Content: Inspector General Oversight, Financial Oversight, Waste, Transparency in Contracting

Authors: Nicholas Pacifico

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